EBN annual report 2012

Annual report 2012 The future of energy

Start gas production from Groningen field

1963

about ebn

Based in Utrecht, EBN B.V. is active in exploration, production, storage and trading in natural gas and oil and is the number one partner for oil and gas companies in the Netherlands.

EBN’s legal predecessor, DSM Aardgas, was set up on 2 January 1973, exactly 40 years ago. DSM Aardgas incorporated the state’s interests in Dutch natural gas production. All the stocks were held by DSM. When DSM was launched on the stock exchange in 1989, the State took over DSM Aardgas’ stocks and placed them with the Ministry of Economic Affairs.

The name was changed to Energie Beheer Nederland B.V. On 1 January 2006, DSM’s administrative responsibility for EBN ended. Since then, EBN has been an independent company with the Executive Board reporting directly to an independent Supervisory Board. In 2011, the official name changed to EBN B.V. Together with national and international oil and gas companies, EBN invests in the exploration for and production of oil and natural gas, as well as in gas storage facilities in the Netherlands. The interest in these activities amounts to between 40% and 50%. EBN also advises the Dutch government on the mining climate and on new opportunities for making use of the Dutch subsurface.

National and international oil and gas companies, the licence holders, take the initiative in activities in the area of development, exploration and production of gas and oil. EBN invests, facilitates and shares knowledge.

In addition to interests in oil and gas activities, EBN has interests in offshore gas collection pipelines, onshore underground gas storage and a 40% interest in gas trading company GasTerra B.V. The profits generated by these activities are paid in full to the Dutch State, represented by the Ministry of Economic Affairs, our sole shareholder.

Exploration

Production

EBN’s influence and responsibilities

Gas storage

Distribution (wholesale)

Distribution (private)

Key figures

number of participations of which exploration EBN’s share of sales (billion m )

2012

2011

187

183

47

48

2

302

sales

8,528

7,103

net profit

2,360

2,131

payments to the State

6,932

5,788

capital expenditure

621

611

depreciation and amortization

745

617

70

68

2.9%

4.1%

2012

2011

CO2-emissions

t.b.d.

765 ton

methane emissions

t.b.d.

6.2 ton

energy consumption

t.b.d.

16.7 PJ

3 1

30

in millions of euros:

number of employees 3 absenteeism

Operational performance4

1 Unless otherwise stated, all volumes in this report are expressed in billions of m3 natural gas (35.17 billion at 0 degrees Celsius and 101.325 kPa) based on EBN’s participation percentage.

2 This includes the proportional share of sales in the concessions in which EBN does not, itself, receive the gas but is entitled to a proportional share in the proceeds.

3 Total number of employees year end 2012.

4 EBN’s share in the operational performance. In the course of 2013, the performance for 2012 will be published at: http://www.ebn.nl/Documents/EBN_operationele_prestatie-indicatoren.pdf.

4 | EBN Annual Report | 2012

Table of contents

About EBN

1

Key figures

2

Vision, mission and strategic pillars

5

Preface by Jan Dirk Bokhoven

8

1

Report by the Supervisory Board

15

2

Report by the Executive Board

23

3

Corporate Governance and Risk Management

41

4

Annual Report

53

General

54

Principles for the valuation of assets and liabilities and determination of profit 56

Consolidated profit and loss account

64

Consolidated balance sheet

65

Summary of changes in shareholder’s equity

66

Consolidated cash flow overview

67

Notes to the consolidated annual accounts

68

Notes to the statement of comprehensive income

69

Notes to the balance sheet

72

Policy to control financial risks

78

Other notes

84

Company profit and loss account

86

Company balance sheet

87

Notes to the company annual accounts

88

Other details

89

Auditor’s report by an independent accountant

90

Key figures

93

Glossary

94

96

Contact information

EBN Annual Report | 2012 | 5

6 | EBN Annual Report | 2012

Vision, mission and strategic pillars

EBN invests in the exploration, production and underground storage of natural gas and oil in the Netherlands. By our participation we secure the revenue for the Dutch state and we guarantee the security of supply of the Netherlands’s main energy source: natural gas.

There are still substantial amounts of potentially producible gas in the Dutch subsurface. A great deal of oil and gas has already been found in the Dutch subsurface, but we are constantly discovering new reserves. However, it will become increasingly difficult to produce them. The easily recoverable reserves have already been produced or are in production, while the less easily recoverable reserves still pose many challenges. EBN facilitates and stimulates its partners in optimally exploiting the subsurface potential.

Furthermore, EBN aims to contribute to a stable energy supply in the Netherlands and, where possible, to contribute to making it sustainable. Gas is the backbone of the current energy supply and gas will remain a significant part of the energy mix. It is the cleanest fossil fuel, with a high energy density and is flexibly deployable. This makes natural gas the ideal energy source for supplying energy when there a fluctuating energy supply.

EBN primarily sees a connection with its activities with geothermal energy (using the subsurface), biogas (using existing gas infrastructure) and offshore wind energy (offshore installation and maintenance knowledge, power to gas technology).

Vision

There is a substantial amount of potentially producible gas in Northwest Europe. Gas is a continuous energy and income source for the Netherlands and is essential for a sustainable energy supply in Europe.

Mission

To optimally exploit the subsurface and contribute to a sustainable energy supply

Strategic pillars To facilitate and stimulate operators in optimally exploiting (existing/new) gas fields

To discover and develop existing and new subsurface potential for the Netherlands

To contribute to sustainable energy system in the Netherlands

EBN Annual Report | 2012 | 7

Vision of the future

2030

8 | EBN Annual Report | 2012

It is the year 2030. The energy sector is turbulent, the

of the transport sector has switched to natural gas and

energy transition is in full swing. The Netherlands is well

superior oil products based on natural gas have made

on its way to achieving the ambition of having an entirely

their debut.

renewable energy supply by the year 2050. This is largely made possible by support from natural gas, which has

The Netherlands fulfills a key role as a natural gas hub,

proved to be the most affordable, reliable and clean fossil

partly due to the presence of small fields that are still

fuel.

productive and the fact that gas storages and an extensive infrastructure ensure the necessary flexibility. One and all

Modern, efficient natural gas generating stations are

agree: Natural gas continues to fulfill a significant role, not

playing a crucial role in accommodating the fluctuating

only socially, ecologically and economically, but also (geo)

renewable energy production. Despite the decline in

politically. In the Netherlands. And in our neighbouring

natural gas consumption in the electricity sector and

countries.

buildings, the use of natural gas is still significant. Part

EBN Annual Report | 2012 | 9

JAN DIRK BOKHOVEN: “There is sufficient potential for remaining self-sufficient for decades to come.”

10 | EBN Jaarverslag | 2012

Admittedly, the scenario described adjacent is no more than a glance into the future. A projected image, of which there are many, especially when it comes down to how our energy sector will be structured in 20 years or so. This much is certain: with the rise of coal at the expense of natural gas and the presumption that there will be no natural gas left by 2030, the prospect we outlined will not automatically become the reality.

As for the last argument – natural gas will be all gone by

the role of natural gas in the energy transition and, on the

2030 – this issue is rather more subtle than many suspect.

other hand, to enter into dialogue with interested parties,

Although gas reserves in the Netherlands have, indeed,

in order to test and enrich our viewpoints. We did so at

been decreasing, a considerable amount of natural gas

various points in 2012 and also do so in this report. We

still remains in the Dutch subsurface, especially if we add

asked four stakeholders with diverse interests for their

the potential of not so easily recoverable natural gas. In

view of the future of energy supply in the Netherlands.

short, there is plenty of natural gas. Now, in 2030 and for many years thereafter. One condition for extracting these

En route to 2030

reserves and generating the associated revenue is that the

In addition to exploring the future of natural gas, as an or-

investment climate must remain positive and a stable sales

ganisation we are also firmly anchored in the here and now.

market and societal support are required.

In early 2012, for example, we presented our employees with the new EBN strategy. A strategy that is intended as

Where do we go from here?

a compass for how we think and act and which consists

In this annual report, we mark the moment when the

of three pillars: facilitating and stimulating operators to

Groningen gas field went into production 50 years ago.

optimally exploit fields, discovering and developing new

Since then, this country has benefited from a great,

and existing subsurface potential and contributing to a

constant flow of natural gas. And although, to this day,

sustainable energy system. We have given further structure

there are considerable reserves, from the very beginning

and content to this in 2012 and we have started compiling

our organisation has been thinking about natural gas’s

a programme of specific actions and projects that will

importance and position in the Dutch energy supply. The

facilitate implementation. You can read about two of these

question ‘Where do we go from here?’ was already a

activities, ‘best in class’ NOV-management1 and the

topic back then and, in the present highly changeable

execution of specific roadmaps, further on in this report.

circumstances, is still a topic now. As a major player in the energy and natural gas sector, we see it as our task and

Energy transition

responsibility to express, on one hand, how we perceive

Going back briefly to the central theme of this report and

1 Non-operated venture management; managing EBN’s joint ventures.

EBN Annual Report | 2012 | 11

Discovery Groningen gas field

1959

12 | EBN Annual Report | 2012

“It is still profitable to invest in small fields.”

the issue that regularly occupies our organisation: Where

we will be able to continue extracting natural gas profitably

do we go from here, after 50 years of natural gas? The

and in a socially responsible manner in 2030, to retain our

fact is that natural gas is of great, if not crucial, importance

energy independence. Time and again, the success we

to Dutch society. And, in our view, that will not be signifi-

have had, in 2012 and in previous years, has shown that it

cantly different in the future. The fact that this country cur-

is still profitable to invest in small fields. From that point of

rently produces almost twice as much gas as it consumes,

view, it is also worth to seriously investigate the possibility of

in itself, is significant from that point of view. There is

extracting gas that is more difficult to retrieve - from shale

sufficient potential for remaining self-sufficient for decades

or coal layers, for example.

to come. In our view, therefore, the natural gas debate should focus not so much on how far reserves will be de-

We also believe that, despite the major changes in

pleted by 2030, but rather: How can we ensure that Dutch

demand and the steep rise in natural gas production in

natural gas becomes the engine in the energy transition

the US, gas revenues will continue to make a significant

and that it continues to flow abundantly in 2030?

contribution to the Dutch economy. Our aim is that the Netherlands will still play a pioneering role on the interna-

Our view of the future

tional energy playing field in 2030 and natural gas will con-

To gain a certain grip on these and similar issues, we

stitute a major component in achieving the Netherlands’

reflected on our vision of 2030 in 2012. This is primarily

CO2 reduction targets. It is therefore essential for choices

intended to organise and hone our thoughts and provide

to be made concerning the energy policy and ensure that

a frame of reference when looking to the future. All this in

gas can start warming up now as the future ‘engine for the

the knowledge that the Dutch and European gas market

energy transition’.

is developing extraordinarily quickly and is hard to predict.

Unquestionably, there will be a great many changes in the

At the end of this preface, I should not omit to mention

area of energy in the coming decades. Output from the

that 2013 is an anniversary year for not only Dutch gas,

Groningen field will decline, the energy market is focusing

but also our organisation. This year, we are celebrating

on sustainability and increasing electrification, and the

the 40th anniversary of the incorporation of our company

possibility of a profitable production of gas from challen-

under the name of our legal predecessor DSM Aardgas

ging formations – such as shale and coal. EBN is keeping

in 1973.

a close eye on these developments and, where necessary, applying them to its policy.

J.D. Bokhoven (CEO)

Pioneering role We already said it in so many words: It’s good to think about the future, even though nobody really knows what the world will be like in twenty years time or longer. And that applies to us too. Nevertheless, we are convinced that

EBN Annual Report | 2012 | 13

Guest column by Wiebe Draijer: Chairman of the Social and Economic Council (SER)

The National Energy Agreement offers the Netherlands a fantastic opportunity to play a pioneering role in sustainability. We are launching a coherent package of initiatives and agreements that give concrete form to the sustainability objectives.

Lagging behind This Energy Agreement is essentially about capitalising on trading opportunities. After all, sustainable growth offers a great many opportunities. Just look at how many jobs it enables us to retain and create. We have to move forward and do what we are good at: leading the way and looking ahead. We have done too little of that in recent years. We have been too focused on ourselves. As a result, we are currently not a model country, we are lagging behind. If you realise that we have now dropped to number 25 in terms of sustainability policy and we have to admit that we are not doing what needs to be done in a number of areas, then evidently, as a country, we have to act. Take energy production, for example, a major sustainability indicator. While other countries are showing an increase in sustainable energy production, in the Netherlands output is declining.

Incentive That we have fallen behind in the area of energy and sustainability policy can partly be explained by the fact that historic natural gas finds have enabled our country to achieve a tremendous acceleration in the use of natural gas as an energy source. The search for alternative energy

14 | EBN Annual Report | 2012

“We can’t afford to follow”

sources and energy renewal has lagged somewhat behind

Optimistic

as a result. Natural gas may have provided us with won-

In my view, one thing is top priority: the time is ripe for

derful infrastructure and knowledge, but its abundance

doing things another way, and together. An increasing

and the low gas prices have, to some degree, eliminated

number of parties are coming to the table, in search of a

the real incentive to innovate. Things are different for coun-

shared solution. The debate used to be far more difficult

tries such as Germany, England and Denmark. They have

and more fragmented, but now we are really working on a

always had a far greater energy demand and have been

shared agreement. Not a recommendation or guidelines,

far more dependent on imports. That promotes inventive-

but an agreement. I realise that we are dealing with big is-

ness and a broader outlook.

sues that need to be solved, but the commitment to tackle them is there. As a country, too, we have the scale for

Sympathetic

such an approach. In the end, we meet up with everyone

President Obama recently said about sustainability: ‘We

and can look everyone in the eye. I’m hugely optimistic

can’t afford to follow’. And that, in my view, applies to the

about the collaboration. And, for the books: It’s not a

Netherlands, too. We will have to actively structure our

SER agreement, but a Dutch agreement. The traditional

own sustainability drive. In my opinion, this entails a com-

partners are participating, but also others, such as envi-

bination of three things: catching up in making renewable

ronmental organisations, decentralised energy companies

energy sources sustainable, cashing in on the local energy

and representatives from society. That’s what I like about

and involvement of citizens and neighbourhoods and

it. It’s a new approach.

earning money from promoting sustainability. These are the themes being debated at Energy Agreement meetings.

We have to earn our position in the world and become

That is where the energy future is discussed and we con-

a prominent world player again. We did not create the

sider how to structure the energy transition, which energy

first polder in our country to gain land, for example, but

source plays which role.

to protect ourselves. We also have to demonstrate that competency in doing things differently and market it in the

Naturally, I am sympathetic toward the position natural

world when it comes to energy and sustainability. From

gas could occupy, especially as we have a great deal of

that point of view, we are going back to our roots! In my

competencies and a huge head start in that field. Time will

eyes, we will have succeeded if, together, we manage to

tell how that will develop, however, in relation to coal for

concretise the innovation, advance in sustainability and

example. The process currently underway is determining

acceleration. A shared growth agenda.

how the transition will ultimately be structured and accomplished. The Energy Agreement roundtables will also determine the speed at which this develops. So if these discussions lead us to conclude that natural gas is the best choice within the energy transition, then fine. I take an open, objective and independent stance.

EBN Annual Report | 2012 | 15

Start production Groningen gas field

1963 16 | EBN Annual Report | 2012

Report by the Supervisory Board

1 EBN Annual Report | 2012 | 17

Report by the Supervisory Board

General

noted any conflict of interest between the company and the

EBN is not a listed company, so the Corporate Governance

members of the board.

Code does not apply to the organisation. EBN does, however, endorse the code’s point of view that transparency

The personal details, the current ancillary functions of the

towards stakeholders is crucial and, where possible and

members of the board and the retirement schedule are

relevant, follows the principles of the code. Thereby EBN

published at the company’s website, under Corporate

follows the government policy for State participations. The

Governance – Supervisory Board

section on Corporate Governance and Risk Management in

(www.ebn.nl/en/OverEBN/Pages/Supervisory-Board.aspx).

this report includes a paragraph indicating those principles of the code EBN follows.

The retirement schedule on page 17 has been discussed.

Mr Van der Meer has decided not to offer himself for re-

The Supervisory Board (the board) complies with the inde-

election for a new term in 2013. At the end of his term, Mr

pendence criteria and the profile sketch as approved by the

Gratama van Andel is re-electable. In accordance with the

shareholder on the grounds of article 12 paragraph 2 of the

board regulations, discussions regarding the nominations

articles of association.

for reappointment will take place in the absence of those involved and nomination for reappointment is not automatic.

The chairman of the board, Mr Van der Meer, is the primary

Nomination for reappointment will always be carefully

contact person for EBN’s Executive Board. The entire board

considered.

has a joint responsibility. All members of the board are also members of the audit committee, the remuneration com-

The Annual General Meeting of Shareholders appoints

mittee, the selection and appointment committee. The table

the supervisory directors on the binding nomination of the

below shows the memberships and chairmanships of the

board. For the appointment of a new supervisory director,

board and the committees.

the board has a profile sketch, which is also published at the EBN website. The profile sketch indicates the charac-

The members of the board do not maintain any other busi-

teristics that the individual members and the board as a

ness relationships with the company. The board has not

whole should possess. The board should be composed

Supervisory Board

Audit Committee

Remuneration Committee / Selection and Appointment Committee

Ir. R.M.J. van der Meer

chairman

member

member

Drs. A.H.P. Gratama van Andel

member

chairman

member

Ir. G-J. Kramer

member

member

chairman

Mr. H.M.C.M. van Oorschot

member

member

member

18 | EBN Annual Report | 2012

Schedule for resignation by rotation Date of first appointment

Date of reappointment

End of 4-year term

Ir. R.M.J. van der Meer

1 January 2006

2009

2013

Drs. A.H.P. Gratama van Andel

1 January 2006

2009

2013

Ir. G-J. Kramer

1 January 2006

2010

2014

Mr. H.M.C.M. van Oorschot

1 January 2006

2010

2014

in such a way that the members can operate critically and

three investments approved earlier by the board. These

independently in relation to each other, the Executive Board

are the budget overrun for the Medway project, the budget

and each partial interest. The composition of the board

raise for the K18-G field development and the budget raise

must account for the nature of EBN’s activities, its mission

for the K4a-Z subsea development.

and objectives, the board’s terms of reference and the expertise of the other board members.

In the last meeting of 2012, the board approved the working schedule and budget for 2013 and the associated financing

Meetings of the board

plan. In this meeting, the Executive Board explained the

The board met four times in 2012. In addition to the board,

proposed amendment to EBN’s and EBN Capital B.V.’s

members of EBN’s team of Directors also attended these

articles of association. The transfer of EBN’s Bergermeer

meetings. The external auditor was present at the first

gas storage assets to EBN Capital B.V. was approved.

meeting during which the annual auditor’s Board report regarding the administrative organisation and internal

EBN’s strategy

control and the annual report control was discussed.

The board discussed EBN’s long-term strategy. The central issue is how the role of natural gas can be maintained in

Mr Gratama van Andel attended one consultation meeting

the future. After all, natural gas accounts for almost half the

between EBN’s Executive Board and the Works Council.

Netherlands’ energy supply. The board and the team of

In June 2012, together with EBN’s team of Directors, the

Directors thoroughly discussed this topic and exchanged

board paid a working visit to the LNG terminal in Maas-

ideas on future scenarios. Clearly, the number of interested

vlakte 2, in Rotterdam.

parties in this field is sizeable and growing. This has led the board to articulate the importance of public affairs, resulting

Approvals by the board

in new initiatives in 2012, partly through collaboration with

The board approved a number of Executive Board deci-

the NSOB (Netherlands School of Public Administration).

sions. The following investments were approved: The expansion of the Norg gas storage and the Chevron A18-A

The board and the team of Directors also discussed the

field development. Budget overruns were approved for

GasTerra strategy and business plan in two meetings.

EBN Annual Report | 2012 | 19

Mr Dessens attended one of these meetings. Mr Dessens

bers and the team of Directors. At the beginning of 2012,

is chairman of Gasterra’s Supervisory Board and also

discussions were held on the functioning of the board and

chairman of GasTerra’s Board of Delegated Supervisory

the joint team of Directors, respectively, as well as on the

Directors.

cooperation between the board and the team of Directors.

This gave no cause for any specific action. The next self-

Relevant developments

evaluation will take place in 2013.

On the basis of quarterly reports, the Executive Board informed the board about the relevant developments within

Meetings of the audit committee

EBN and, in particular, the developments in EBN’s joint

The tasks and methods of the audit committee are set

ventures. A number of discussed topics are explained in

out in the ‘regulations for the Audit Committee of the

further detail below.

Supervisory Board’. The audit committee’s tasks include supervising, auditing and advising the Executive Board on

Bergermeer Gas Storage

the functioning of internal risk management and control sys-

The board discussed the progress of the Bergermeer gas

tems and supervising the company’s financial reporting.

storage. After the positive pronouncement by the Council of State, the building work has actually begun. The board will

The audit committee met twice in 2012. In addition to the

continue to follow the progress of this project in 2013.

members of the audit committee, a number of members of the team of Directors also attended these meetings.

Earthquakes in Groningen

In the first meeting, the audit committee reviewed, amongst

The Executive Board informed the board of the most recent

other issues, the annual report, the financial statements

earthquakes in Groningen, including the one in Huizinge,

and the independent auditor’s report for 2011. The external

and how NAM dealt with the damage it caused. This topic

auditor Ernst & Young also attended this meeting for the

is discussed in more detail on page 36.

purpose of the audit for 2011. The audit committee advised the board to approve the annual report for 2011.

Shale discussion The Executive Board also informed the board of the societal

In the second meeting, the audit committee discussed the

discussion on the possibility of extracting gas from shale in

internal audit plan for 2012. The Director Finance explained

North Brabant. The research the Minister of Economic Af-

this plan. The audit committee had nothing to add to this.

fairs has commissioned should be completed in 2013.

Attention was also devoted to the Weighted Averaged Cost of Capital (WACC) EBN will be using and the post

Self-evaluation

investment review. Furthermore, the findings of the audit

The Supervisory Board discussed the functioning of the

of the tax authorities with regard to value added tax were

Executive Board without its presence. In 2011, together

discussed.

with the team of Directors, the board carried out a selfevaluation of the functioning of the individual board mem-

20 | EBN Annual Report | 2012

The board asked the Executive Board to provide the board

resign in the course of 2013. The statutory director is chair-

with a statement for 2012 to support the usual reports

man of the team of Directors.

to the Executive Board. The Executive Board issued that declaration, which serves to support provision III.1.8 of

Financial statements

the Corporate Governance Code. In accordance with this

The Supervisory Board reviewed the annual report, the

provision, the board discussed the following topics with the

financial statements and the independent auditor’s report

Executive Board: the company’s strategy and strategic risk

issued by the auditors Ernst & Young. The board can

analysis and the results of the Executive Board’s evaluation

accept these and recommends the General Meeting of

of the structure and functioning of the internal risk manage-

Shareholders to adopt the financial statements accordingly.

ment and control systems.

The board advises the Annual General Meeting of Share-

Meetings of the remuneration committee/ selection and appointment committee

holders to discharge the Executive Board of responsibility

The tasks and methods of the remuneration committee/

visory Board of responsibility in respect of its supervision.

in respect of the policy it has implemented and the Super-

selection and appointment committee are set out in the ‘Supervisory Board’s regulations for the remuneration committee/selection and appointment committee’. This commit-

Supervisory Board, Utrecht, 20 March 2013

tee’s tasks include presenting proposals to the board for the remuneration policy the Executive Board will implement - to

R.M.J. van der Meer (chairman)

be established by the AGM -, proposing the remuneration

A.H.P. Gratama van Andel

of the individual members and compiling a remuneration

G-J. Kramer

report.

H.M.C.M. van Oorschot

The remuneration committee/selection and appointment committee met three times in 2012. The committee discussed the Executive Board’s functioning and set the variable remuneration for the Executive Board for 2011.

The Executive Board’s variable remuneration was made dependent on achieving the objectives in the following areas: added economic value, exploration, budget and HR. As from 2011, the Executive Board consists solely of J.D. Bokhoven. Since the beginning of 2013, the team of Directors comprises of one statutory director (Jan Dirk Bokhoven) and three functional directors. The fourth functional director who was in function during 2012, will

EBN Annual Report | 2012 | 21

Guest column by Pieter Boot: Sector head of climate, air and energy at the Netherlands Environmental Assessment Agency There are two ways of viewing the year 2030: As seventeen years hence, or from the point of view that it will then be twenty years before 2050. What I want to say is that the world will simply go on turning after 2030, so we have to approach it from both perspectives.

The drawback of a 2020 or 2030 objective is that it does provide direction, but it also implies that the job is then finished and there is no more to be done. And that doesn’t seem like a good approach to me. Naturally, the problem with every scenario is that the future is extremely difficult to predict. Certainly when you are looking more than thirty years ahead. In principle, we can make a reasonable estimation and foresee which elements will then need to be included in the energy picture. I see the route mapped out until that time not so much as a fixed schedule, but rather as a guideline for reflecting on the question: What will we really need by that time? I see 2030 as a stopover.

Focal points In my view, there will be five major focal points over the coming years. The first is more efficient energy use, by better insulating our homes, for instance. The second is clean electricity and, in saying that, we already know we will never succeed in making our energy mix entirely renewable, as that is technically extraordinarily difficult. Thirdly, there will be sustainable biomass. It’s becoming scarce, but it can be used in places where you have no alternative. Number four is CO2 storage, under the sea, for example. There is

22 | EBN Annual Report | 2012

“We should step up our combined efforts”

an awful lot of industry producing emissions and, in the

days, policy will no longer succeed if you are working

end, you have to do something with those emissions.

against the will and the wishes of the citizens. Take the CO2

Finally, the other greenhouse gases. All these themes and

storage project in Barendrecht, for example. In the end,

developments are influence each other. From our agency’s

citizens managed to halt the project, because they simply

perspective, climate and energy are interlinked.

did not want it. It’s essential to involve citizens and listen to them. Otherwise you will not succeed. These days, citizen

Clear

initiatives are regarded far more sympathetically than the

Hopefully, the Energy Agreement will make it quite clear

figures suggest, but ultimately it’s all about creating aware-

what steps we need to take to set the process in motion

ness. You have to remove the hurdles for people and en-

and keep it moving. All those countries that are relatively

courage them with good policy. What you definitely have to

successful in the field of energy have such a long-term

avoid is to compare small-scale campaigns with large-scale

approach. Actually, it’s impossible to do without it; having

activities. You have to fit them together. This interaction is

your own energy process is crucial. In some aspects, policy

increasingly important and is key to achieving size, signifi-

is stable; in others it’s less stable. Where gas is concerned,

cance and dynamics. So far, I have been seeing too little in

policy is clear and stable, but where renewability is con-

the way of combined efforts and cooperation.

cerned things are far from unambiguous.

Example Pace

I feel there is still too great a focus on indicators such as

There are those who feel the whole energy transition is pro-

volume, size and quantity. And there is too little attention

ceeding too slowly. Particularly when you look at neighbou-

being paid to quality and distinction. What we need is smart

ring countries, where everything seems to be progressing

applications, innovative solutions, outstanding experiments.

rather more quickly. I also think we have lost momentum in

The Netherlands should be more prominent in this area, so

recent years and could speed things up a bit. At the same

it can act as a testing ground for Europe. A model of smart,

time, however, implementing the energy transition is a huge

sensible policy, focusing on pooling knowledge, learning

undertaking, even though that’s relative compared with

from one another, sharing. Denmark is an extremely good

countries such as Germany. It is a fact that, in the energy

example. They are also experimenting within their regions.

system, everyone is pulling switches and there is nobody

This has produced various smart grids, which are attracting

who is pulling all the switches. Therefore, everything de-

a great deal of attention from abroad. In short: increasingly,

pends on collaboration. And we’re convinced that it’s pos-

policy has to provide added value. And that is what makes

sible: Companies are willing, politicians are also keen now

the gas policy so interesting. How closely can gas and

and environmental organisations want to cooperate, too.

renewable energy be combined? In Germany, they are not sure how they feel about gas or how they should proceed

Interaction

with renewability. We can play a pioneering role in this res-

Citizens definitely play a role too. We have dubbed this the

pect, acting as their testing ground.

‘energetic society’. And its’ extremely important. These

EBN Annual Report | 2012 | 23

1965 24 | EBN Annual Report | 2012

Report by the Executive Board

2 EBN Annual Report | 2012 | 25

Report by the Executive Board EBN closed the 2012 year with net sales of EUR 8.528 billion. This generated a net profit of EUR 2.360 billion. Total payments to the Dutch state, including taxes, amounted to EUR 6.932 billion.

Looking back at 2012 EBN’s share in the total gas production corresponded with the forecast and amounted to more than 30 billion m³.

This production level is comparable with preceding years.

The investment level rose slightly in 2012. The start of a

Participation in exploration and production 200

150

total 176

total 172

101

101

27

24

43

42

number of new projects contributed to that rise. Both the number of exploration and appraisal wells and the number

100

of production wells was lower in 2012 than in 2011. In 2012, EBN also further elaborated on its strategy. The

50

concrete result was an improved approach to non-operated venture (NOV) management. This should, in principle, lead

5

0

2012

to more intensive collaboration with the operators.

Participation in licences

5 2011

Offshore production

Onshore production

Offshore exploration

Onshore exploration

In 2012, the number of EBN joint ventures increased further to 187. Two licences were transferred from explora-

EBN Capital B.V.

tion to production. Two extra licences were created by

On 15 November 2012, EBN’s two wholly-owned subsidi-

splitting two production licences. EBN is participating in

aries, F3/A6 Extensie B.V. and K13 Beheer B.V., merged.

nine new joint ventures for exploration while eight joint

At the same time as the merger, the articles of association

ventures have ended. These exploration licences were re-

for F3/A6 Extensie B.V. (the surviving entity) were amended

turned by the licence holders to the Ministry of Economic

and the name changed to EBN Capital B.V.

Affairs.

This merger is part of EBN’s restructuring in order to transIn addition to 176 joint ventures in exploration and produc-

fer the Bergermeer gas storage – in accordance with the

tion licences, EBN participates in four pipelines, four gas

Minister’s requirements – to a separate company, namely

storages, the gas purification plant in Emmen, the K-13

EBN Capital B.V.

gas treatment installation in Den Helder and gas trading company GasTerra B.V.

26 | EBN Annual Report | 2012

Activities 2012 By project type

gas recovery • Enhanced Field development • Gas storage • Seismic • Drilled well • Abandoned well •

EBN Annual Report | 2012 | 27

Portfolio of gas and oil fields

performances of previous years. Over the period between

The total number of gas fields in the Netherlands in which

2005 and 2011 the success ratio was 60%. The number

EBN participates is 265, of which 235 fields are in produc-

of production wells fell sharply from 38 in 2011 to 18 in

tion. EBN also participates in four producing oil fields and

2012. Activity in 2011 was higher due to the redevelop-

four gas storage facilities. In the year under review, 10 new

ment of the Schoonebeek oil field. 17% of production

gas fields and one new oil field were taken into production.

wells were unsuccessful, a surprising and disappointing

These fields account for 11 billion 0.3 billion

m3

m3

of gas reserves and

result.

of oil reserves. The added production capacity

due to new fields is 8 million m3 of gas and 400 m3 of oil per day.

Exploration and production wells 2012 20

Capital expenditure from EUR 611 million in 2011 to EUR 621 million in

10

Bergermeer gas storage and the expansion of the Norg gas storage. Substantial investments are also expected for these projects in 2013.

5

0

Exploration wells Dry

Investments ( in EUR million )

600

3

2 1 15

2 1 9

2012. The biggest investments were made in building the

total 621

total 18

15

Capital expenditure in EBN’s joint ventures rose slightly

800

total 15

Production wells

Uneconomical

Oil

Gas

total 611

Production and reserves 291

In 2012, gas production from the Groningen field amount-

323

ed to more than 47 billion m³ and gas production from 400

small fields in which EBN participates to almost 27 billion 294

0

m³. This brought the total of gas produced in 2012 up to

140

200

more than 74 billion m³. EBN’s share of the gas production 148

36 2012 Construction operations

was more than 30 billion m³ and our organisation’s net oil production was 0.3 million m³. Production from and injec-

2011 Production wells

Exploration activities

tion into the Norg, Grijpskerk and Alkmaar underground gas storage was more than 3 billion m³ in the year under review and, net, approximately equal to zero.

Wells 10 out of 15 exploration and appraisal wells struck oil or

In determining the reserves, our organisation applies

natural gas. At 67%, the success ratio is comparable with

the definitions set down in the Petroleum Resources

28 | EBN Annual Report | 2012

Management System, with categories 1 to 3 are taken

by the relatively high oil production prices in 2012. EBN’s

into consideration as reserves. As at 31 December 2012,

result from gas production rose again in 2012 compared

gas reserves (on a 100% field basis) in the fields in which

with the same period in the previous year, primarily due to

EBN participates amounted to 977 billion m³, of which

the higher gas prices in 2012.

EBN’s share is 395 billion m³. The decline in reserves from 1,065 billion m³ in 2011 to 977 billion m³ in 2012 can be

Result for the year

explained by the quantity of gas produced, a downgrade

The annual sales for the year grew compared to 2011 by

of more than 38 billion m³ of existing reserves and an

EUR 1.425 billion (20%), to EUR 8.528 billion. The increase

addition of 24 billion m³ to new reserves.

in sales is mainly due to higher sales prices (18%), with natural gas sales remaining virtually constant. Sales

The downgrade merely concerns a change in the ultimate

volumes for oil rose (81%) and the average oil price was

recovery from the Groningen field and the associated gas

lower than in 2011 (-4%). The drop in average oil prices

storage. The new reserves originate from the ‘small’ fields

is mainly explained by the low quality of the oil from the

and primarily concern resources transformed into reserves

Schoonebeek field, leading to lower sales prices. Sales

in 2012 and a number of successful exploration wells.

volumes for condensate fell (-8%), while the average condensate price rose (14%).

Sales Unlike the demand for gas, Northwest European gas

The net profit amounted to EUR 2.360 billion. Operational

market prices remained stable last year. Contrary to

costs amounted to EUR 797 million, EUR 139 million more

expectations, the increased demand for coal, growing

than in 2011 (21%). Total payments to the Dutch State,

energy efficiency, sustainable electricity generation and the

including levies, amounted to EUR 6.932 billion.

economic crisis evidently had no negative effect on the development in gas prices in 2012. The TTF Month Ahead (MA) price level was around 25 EUR/MWh. Spot prices demonstrated a slight uptrend in the year under review. In

Payments to the Dutch state ( in EUR million) 8,000

total 6,932

total 5,788

the first six months of 2012, on average, the TTF MA was below 25 EUR/MWh and, in the second half of the year,

6,000

slightly above. Apart from a slight peak in February, there were almost no seasonal influences.

In 2012, the Normative Buying Price (NBP, the price GasTerra pays for gas from small fields) followed the same trend as the TTF MA, but with a premium of roughly 2 EUR/MWh. The oil link percentage of the 2012 NBP fell

771 3,801

4,000

693 2,964

2,000

2,360

2,131

2012

2011

0

Corporate Income Tax

Levies

Net profit

slightly in relation to 2011, but that was compensated for

EBN Annual Report | 2012 | 29

Bergermeer Gas Storage Flexible Energy

In May 2012, EBN and operating partner TAQA

in the Netherlands. Wherever possible, the work is

received the green light from the Council of State for

awarded to local subcontractors.

constructing the Gas Storage Bergermeer after years of preparation and an extensive licensing procedure.

With a capacity of 4.1 billion cubic metres, the Gas

The official start of the construction was celebrated

Storage Bergermeer will be the biggest freely-acces-

in October in the presence of former Minister of

sible gas storage in West Europe. That is the equiva-

Economic Affairs, Agriculture and Innovation,

lent of the average annual gas consumption for 2.5

Minister Verhagen.

million Dutch households. This will double gas storage capacity in the Netherlands. The additional capacity

The construction was able to proceed once an optimal

will ensure a better functioning energy market and,

layout for the project had been devised, together with

ultimately, more competitive consumer prices. Re-

local stakeholders. For example, the gas storage will

nowned energy companies, such as Statoil, Vattenfall

be blended into the landscape, drilling will be carried

and EDF, have already reserved capacity during the

out under the HeilooĂŤrbos woods for laying gas pipe-

open seasons.

lines and a breeding ground is in place for black-tailed godwits.

The main theme for 2013 is project realisation: the connection pipelines are being delivered, a start is

Achieving sufficient storage capacity contributes to

being made on putting the treatment plant into

the Dutch government’s ambition of developing the

operation and 14 new wells are being drilled at the

Netherlands as the number one hub for the Northwest

Bergermeer well site. The gas storage will partially

European gas market. Furthermore, the gas storage

be put into operation in 2014, after which the entire

provides the necessary flexibility in energy supply when

capacity will be available in 2015

there is insufficient solar and wind energy available.

For the same reasons, we are investing in expanding the Norg gas storage, together with operating partner NAM. The investment of more than EUR 800 million in the Gas Storage Bergermeer can be counted amongst the biggest private investments in the Dutch economy of this moment. We see this as a positive sign for the Dutch investment climate. Moreover, the project gives a major boost to the development of the energy region around Alkmaar. The construction of the gas storage will generate 3,300 man years of work, of which 2,650

30 | EBN Annual Report | 2012

Financing

Stranded fields

In July, EBN issued new loans in Swiss francs for the value

In the past, more than 120 gas or oil fields have been identi-

of a total of EUR 300 million. This comprises a tranche

fied that have not (yet) been developed, for various reasons.

of CHF 235 million with a seven-year term and a tranche

In 2012, the overview of these fields was further detailed

of CHF 125 million with a twelve-year term. After swap-

and a study was carried out into how the gas reserves

ping the return into euros and covering the interest rate

could be developed, for instance by investigating the

and currency risk, the total costs amounted to 1.87% for

possibility of using the technology of hydraulic fracturing.

the seven-year tranche and 2.46% for the twelve-year tranche. The bonds are issued primarily to finance capital

End of field life

expenditure.

Old gas wells have the tendency to stop production as a result of diminishing pressure and an accumulation

Roadmaps

of water at the bottom of the well. There are, however,

There are still many steps to be taken before EBN’s ambi-

various techniques for extending the life of these wells

tion of annually producing 30 billion m³ of natural gas from

and therefore maximising their output. In 2012, EBN

small fields up until 2030 has been achieved. To chart

conducted research into these options and compared

these steps, EBN compiled seven roadmaps in 2010. The

operators’ performance in this area. With this knowledge,

associated action and activities are intended to ensure

operators are being proactively approached with proposals

more innovation in exploration and production technology

for improved end-of-field-life strategies.

and methods that lead to the development of new gas and oil fields. We present the findings ensuing from these

Tight reservoirs

activities on (inter)national stages and conferences and

Low-production reservoirs are often characterised by

during workshops with operators active in the Nether-

reservoir rock, which is difficult for gas and oil to permeate.

lands, so that knowledge can be shared within the (Dutch)

In 2012, these tight reservoirs were inventoried and we

E&P sector. In line with 2011, in the year under review we

carried out simulations to provide insight into the value of

also focused on the progress of the roadmaps.

this part of the gas portfolio. EBN is issuing its recommendations to its partners based partly on the results of these

Exploration

analyses. Successes that have been achieved show that

Two major studies dominated EBN’s exploration activities

the technology of hydraulic fracturing can, for instance,

in 2012. One was the research into the prospectivity in the

play a key role in the possible future development of these

offshore A, B, D, E and F quadrants, where relatively little

low-production reservoir rock formations.

exploration has taken place in the past. The objective of this study is to analyse the chances and bring them to the

Shallow reservoirs

attention of the industry. A comparable study focuses on the

In 2012, EBN conducted a number of detailed studies

prospectivity of the Dinantian limestone. This is found on-

into natural gas in shallow reservoirs in areas for which

shore in the Netherlands and in the southern offshore areas.

no licences have yet been issued. The ‘bright spot

EBN Annual Report | 2012 | 31

Societal concern Gas from shale layers

characterisation system’ was also expanded. With this system, a score can be awarded to each potential gas As part of its role to maximise the value of the

reserve, indicating the chance of the presence of

subsurface for Dutch society, EBN is investigating

(economically) producible quantities of natural gas.

the potential of new technological possibilities and the deployment of existing techniques for new applications in the Netherlands, such as natural gas in shale layers. One condition here is that exploration

Infrastructure EBN has determined a number of scenarios for the dis-

and production activities must be carried out respon-

mantling date for all offshore gas production installations

sibly, with care for man and the environment. There

in the Netherlands. The options for developments near the

are many concerns with regard to extracting natural

installations which are at the end of their life were analysed

gas from shale. For that reason, a study into the risks

on the basis of an urgency list. For operators, this clari-

entailed in these activities for man and the environ-

fies the importance of retaining these installations on the

ment is being carried out. The study is issued by the Ministry of Economic Affairs. EBN considers this independent research to be important and is looking forward to the results.

Continental Shelf.

Shale reservoirs In 2012, EBN succeeded in carrying out important data

In the year under review, EBN attended an external

acquisition in a geothermal well in North Limburg. These

‘knowledge workshop’, where EBN shared its

data have proved to be extremely useful in determining

knowledge in the field of extracting gas from shale.

the geographic distribution and quality of shale layers in

Various stakeholders attended, which led to a valuable and broad exchange of views and information. In 2013, too, EBN will communicate transparently and openly and will continue listening to stakeholders,

the subsurface. EBN provided information on request to interested media and held presentations during various public meetings.

in order to produce natural gas responsibly with societal acceptance.

Social importance EBN sees corporate social responsibility as an integral part of its activities. This is reflected in such areas as: — contributing to Dutch society witch revenues from natural gas — developing and sharing knowledge — interaction with stakeholders — care for personnel

Societal contribution through gas revenues Gas revenues are an important source of income for the Netherlands. The dividend and tax EBN pays to the

32 | EBN Annual Report | 2012

Dutch State amounts to approximately half the total gas

Top sectors

revenues. This income accounts for 5% of the total state

EBN participates in the Top Consortium for Knowledge

income and therefore contributes significantly to the

and Innovation (TKI) in the context of the gas innovation

Netherlands’ prosperity. In 2012, according to expecta-

contract (TKI-gas). The TKI-gas contract includes the

tions, the total gas revenues amounted to approximately

upstream gas programme line, in which EBN participates.

EUR 14 billion, the equivalent of EUR 850 per capita of

Within the various innovation contracts, businesses and

the population. We therefore consider it to be our respon-

researchers join forces to develop new products and ser-

sibility to secure the revenue from gas production for the

vices. The objective of the upstream gas programme line

Netherlands in the future.

is to provide innovative solutions to enable the extraction of the maximum amount of gas from the Dutch subsur-

Developing and sharing knowledge

face, an ambition that fits in well with our organisation’s

Developing and sharing knowledge and information and

objectives. A number of projects have been formulated for

making them accessible are a crucial part of EBN’s tasks

contributing to achieving this objective. EBN, the industry,

and responsibilities. That applies both within the oil and

knowledge institutions and universities are the participating

gas industry and in relation to the government. EBN is

organisations.

keen to interpret this role as broadly as possible to give our social involvement a structured, demonstrable form

Operational performance

and make it transparent for all our stakeholders.

To monitor the economic, social and environmental aspects of its operational management and operational

In the year under review, we also supported various or-

activities, EBN has formulated key performance indicators

ganisations and events that contribute to the development

(KPIs). These were enlarged upon in 2012. Data is being

and distribution of knowledge on oil and gas production

gathered from EBN’s operating partners in gas and oil

in the Netherlands. EBN contributes to the Clingendael

extraction.

International Energy Programme (a think-tank for geopolitical issues) and the Energy Delta Institute (a training and

We see monitoring EBN’s economic, social and environ-

knowledge institute for the gas industry); in addition, we

mental performances as the next step in our aim to stimu-

are one of the founding partners of the Energy Academy

late the Dutch E&P sector in delivering better operational

Europe, which was launched in 2012. As a knowledge

performance. Aided by the GRI performance indicators,

organisation, EBN is an employer with a great many spe-

our overarching position enables us to provide the sector

cialists in specific domains related to oil and gas produc-

with insight and take a leading role. This also provides us

tion. This in-depth knowledge is shared on diverse stages.

with the opportunity to discuss individual performances

In 2012, for example, EBN personnel gave 35 lectures on

with the operators.

topics such as the mining climate in the Netherlands, the production of gas from small fields and the importance of

The KPIs have partly been established on the basis of

gas in the Dutch total energy supply.

general GRI guidelines and partly on the specific guidelines

EBN Annual Report | 2012 | 33

NOV-management Proactively adding value

for the oil and gas industry. All figures and the background on the 21 KPIs for the period between 2003 and 2011 Non-operated venture (NOV) management essentially

can be found at www.ebn.nl/Documents/EBN_opera-

entails intensifying the relationship with our operators,

tionele_prestatie-indicatoren.pdf. The figures for 2012 will

proactively managing the existing EBN asset portfo-

be added in the course of 2013.

lio and finding themes and topics to serve as input for developing EBN’s long-term vision. In 2012, an intensive programme was started for lifting the NOV management to a higher plane.

EBN realises that, without the solid, continuous growth of projects that can add gas reserves, the annual production from small fields will rapidly diminish. To tackle that reduction, EBN developed the NOV management cycle in 2012. This annual cycle ensues from the re-assessment of the strategy in 2011.

As a non-operating partner in almost 200 participations, EBN considers it important to have a strong focus on activities that create the most added value for the Netherlands. With the NOV management cycle, EBN has developed a system for working with strategies and action plans aimed specifically at individual operators. This further increases the possibilities for optimal management, giving an extra boost to the

Operational performance

2011

2010

Energy consumption

16.7 PJ

15.7 PJ

Energy saving

2,963 TJ

3,126 TJ

1.7%

1.5%

CO2-emissions

765 ton

720 ton

Methane emissions

6.2 ton

6.5 ton

3.1 M m3

3.3 M m3

Number of incidental discharges

15

22

Volume of incidental discharges

1.2 ton

17.6 ton

2011

2010

Fatal

0

0

Industrial accidents leading to absenteeism

20

21

Industrial accidents not leading to absenteeism

23

24

Energy consumption as a percentage of the energetic hydrocarbon production

Production water discharges

Industrial accidents (entire industry)

management of the existing asset portfolio in the short and medium term. In 2013, the NOV management cycle will be rolled out under the responsibility of the

Interaction with stakeholders

Director Asset Management. The link with the existing

EBN aims to be approachable, clear and transparent and

roadmaps and knowledge sharing within the industry will be expressly reinforced. A great deal of attention will also be devoted to operationalising an effective performance measurement

considers it to be important to maintain contact with its surroundings. We believe in listening and learning, but also in informing and inspiring. As our organisation always lends an ear to other people’s opinions, we also consider it to be an important task to actively express our vision of the importance of natural gas.

Increasingly frequent, we are having intensive discussions with partners. Consequentially, EBN is increasingly

34 | EBN Annual Report | 2012

being seen as the binding factor in the sector. We would

Complaints handling

like to make optimal use of this position for sharing our

Stakeholders and discussion partners can reach EBN by

knowledge and experiences and making them of benefit

telephone and e-mail, but the general public can also con-

to the various (energy) dossiers. For us, incidentally, the

tact EBN in the event of complaints about operational ac-

focus here is on informing, rather than influencing people’s

tivities. Although EBN is never the operator, our communi-

opinions. We gather our discussion partners from amongst

cations department will ensure that complaints are passed

the major stakeholders in the energy debate, such as the

on to the appropriate department and to our operating

Dutch government, the E&P sector, knowledge and re-

partners. Together with our partners, we aim to deal with

search institutions and universities, but also Dutch society

complaints as swiftly as possible and to the satisfaction of

as a whole.

all parties involved. EBN received no complaints in 2012.

At various times in 2012, too, we invested in numerous

The people of EBN

ways in relations and knowledge exchange with stake-

EBN offers professionals with a passion for their discipline

holders. One important element in this is EBN’s renewed

the chance to develop themselves, thus contributing to

website, which was launched in April 2012. The main

EBN’s unique position in the Dutch energy chain and cre-

reason was our wish to provide the environment in which

ating support for natural gas projects.

we operate with better and more concrete information on EBN’s essence and intentions but, more particularly, on

Workforce

natural gas. The website gives a clear, accessible overview

EBN grew slightly in 2012 from 63.5 FTE to 65.8 FTE.

of what we do and think, what we contribute to and in

Over the past year, EBN also engaged nine external em-

what activities we participate.

ployees on a temporary basis and offered five students the opportunity of a (graduation) work placement at EBN.

We see it as one of our major tasks to act as a source of information on natural gas, so in 2012 we helped to set up

One of EBN’s aims is to increase the percentage of

the aardgas-in-nederland.nl website. This online platform

women personnel, particularly in technical and manage-

gives an accessible, comprehensive view of the oil and

ment positions. In relation to 2011, the percentage of

gas world. The website was created with six partners.

women working at EBN rose slightly, to 33% of the total

EBN was responsible for the content regarding natural

population, with 25% of professional and management

gas and the energy transition. EBN also contributed to

positions filled by women. Within the technical depart-

De Bosatlas van de energie, an energy atlas. The book

ment, too, EBN succeeded in achieving an increase in the

provides insight into the present, past and future of energy

number of women. Over the past year, two new women

supply in the Netherlands. The atlas will be distributed to

employees have joined us in specialist technical roles and

schools in 2013, together with a specially compiled teach-

one of the two Ph. D. research projects is being carried

ing package.

out by a woman.

EBN Annual Report | 2012 | 35

New reserves Investing in small fields

The average age of the EBN population relatively declined in 2012 to 41 years. 66% of our workforce is under the The Dutch gas reserves are diminishing due to the

age of 45. You can find more information on the composi-

annual gas production. According to Focus on Dutch

tion of our workforce online, at:

Gas, the annual EBN publication on the Dutch E&P

www.ebn.nl/en/werkenbijebn

sector, without further investments gas production from small fields will be halved by 2015. It is important to add new reserves to combat that reduction.

Training EBN is a knowledge organisation with a high average level

The small fields offer many opportunities for adding

of education (81% higher than intermediate professional

reserves. We are attempting to exploit those oppor-

education):

tunities by investing, together with our partners, in exploration wells and field developments. Investments

Education level

in almost depleted gas fields enable us to produce

University: 70%

more gas from these fields, for example.

Higher professional education: 11.4%

Intermediate professional education: 18.6%

2012’s figures show that our investments are pay-

Naturally, we invest in the development and training of our

ing off: 26.8 billion m3 were produced from the small

personnel. EBN also develops special management days in

fields, while the developed reserves increased by 0.3

which current affairs and strategic leadership components

billion

m3

(from 129.5 billion

m3

to 129.8 billion

m3).

In

are discussed.

other words, production was replaced for more than 100% by newly developed reserves. 25.5 billion m3 were added to the existing reserves and 1.7 billion m3 were added to new reserves as a result of exploration.

We encourage employees to continue developing themselves both personally and professionally. Employees attend, on average, 53 hours of training a year, and the

Resources are identified opportunities that can pos-

total number of training days rose from 417 in 2011 to

sibly be transformed into reserves. EBN analyses

477 in 2012. Inspiring and contentual training will remain

new resources with the aid of roadmaps. Due to our

a focal point for HR policy in the years to come.

investments in exploration and new projects, in 2012 the resources increased from 200.4 billion m3 to 252.5 billion m3. This increase shows that there is still plenty of potential in the Dutch subsurface. A large part of

Offering training and work placements is an essential part of EBN’s strategy. Moreover, in 2012, the second Geo

these resources can be transferred to reserves in the

Energy Master Award was presented in collaboration with

coming years.

the University Fund Delft. The prize encourages students of Delft University to conduct high-quality research into energy sources from the Dutch subsurface and, in this way, EBN endeavours to meet potential future employees.

36 | EBN Annual Report | 2012

Absenteeism in %

2012

2011

Short-term absenteeism (<8 days)

1.1

1.0

Medium-term absenteeism (8-42 days)

0.5

0.3

for example, following up on the Periodic Medical Sur-

Long-term absenteeism (>43 days)

1.3

2.8

vey (conducted in 2011), we offered our employees the

Total

2.9

4.1

Health and safety Vitality and health are major focal points for EBN. In 2012,

chance to make use of chair massages to prevent workrelated conditions. After evaluation, the effect of the chair

Confidant(e)

massages proved positive, which made us decide to con-

In the event of complaints, employees can approach a

tinue the service on a structural basis. Additionally, EBN

confidant(e) or the complaints board. In 2012, neither the

encouraged its employees in 2012 to develop a healthier

confidant nor the complaints board received any com-

lifestyle, by providing individual vitality coaching.

plaints.

In 2012, we commissioned an asbestos check at the

Works council

office in Utrecht. Asbestos was discovered, but in such

In 2012, formal consultation between the CEO and the

a degree that it constitutes no health risk as long as no

works council took place four times. A member of the Su-

structural rebuilding takes place. Protective coating and

pervisory Board attended one of these meetings. As usual,

stickering will be carried out in the first quarter of 2013.

there was informal discussion on a regular basis.

At year-end 2012, the EBN emergency response team

The major issues dealt with in the year under review were

had six members. One evacuation exercise was carried

the proposed relocation of the organisation within Utrecht

out. There were no safety incidents in 2012 and no

and a change to the evaluation and remuneration system.

industrial accidents, either with or without absenteeism

The major issues completed in 2012 are an amendment

as a result.

of the target and remuneration cycle and a revision of the regulations protecting whistle-blowers.

Absenteeism Absenteeism fell strongly in relation to 2011 from 4.1% to

The works council consists of three members: Jeroen

2.9%. EBN implements an active reintegration policy for

Piket (chairman), Ruben Swart and Edmund Wellenstein

getting employees back to work responsibly, as soon as

(secretary). Martin Boubin resigned in mid-2012. No suc-

possible after (protracted) illness. Long-term absenteeism

cessor has yet been found for him. The works councilâ&#x20AC;&#x2122;s

fell in 2012 to 1.3% (from 2.8%) and short-term absentee-

term of office runs until 31 December 2013.

ism decreased slightly from 1.3% in 2011 to 1.2% in the year under review. Our organisation therefore also com-

Outlook for 2013

plied in 2012 with its aim to keep short and medium-term

In view of the current recession and the crisis in Europe,

absenteeism below 3%.

we do not expect the economic situation in 2013 to be much different from that in 2012. From that point of view, the outlook therefore remains slightly negative, which will

EBN Annual Report | 2012 | 37

Earthquake risk in Groningen Thorough investigation necessary

also affect the demand for and consumption of natural gas. Although the gas supply is slowly declining, due to On 16 August 2012, there was an earthquake (3.6 on

falling production and the decrease in LNG deliveries in

the Richter scale) in Huizinge, in the municipality of

Europe, the turning point from a gas surplus to a shortage

Loppersum. The force of this earthquake prompted

in Northwest Europe is now expected in 2018. Six months

the Dutch State Supervision of Mines (SodM) to conduct further research into the relationship between the production of gas from the Groningen field and

ago, that date was still 2016. As a result of the present economic conditions, the Netherlands is not expected to

the frequency and force of earthquakes.

constitute an exception in terms of gas surplus.

SodM then discussed the findings of this research

Supply from the Groningen system is expected to remain

with the Royal Netherlands Meteorological Institute

at virtually the same level in 2013 as in 2012. If that

(KNMI) and NAM. In the months of November and

expectation is fulfilled, which partly depends on the

December, EBN experts participated in discussions with SodM, KNMI, NAM and Shell, with the aim of arriving at a widely supported analysis and recommen-

average temperature throughout the year, then supply from Groningen will have to be adjusted slightly down-

dation. EBN was closely involved in this issue at policy

wards in 2014 and 2015 to comply with the (legally

level too, through consultation with the partners in the

defined) Groningen ceiling for the 2011 - 2015 period.

Gas building partnership (apart from GasTerra).

Following the earthquake in August 2012 in Huizinge, in In January 2013, the Minister informed the government about the recommendation received from SodM, his decision to not yet intervene in the production practice from the Groningen field and the preventive

the municipality of Loppersum, research will be carried out in 2013 into the earthquake risk due to natural gas production from the Groningen field. The results of this

measures to be taken in 2013. Based on the outcome

investigation are expected in the course of 2013 and may

of the studies to be carried out this year, in December

have consequences for future gas production.

2013 the Minister will decide whether to adjust the production from the Groningen field.

EBN shares the concerns for the consequences of earthquakes induced by gas production and supports the agreed approach for 2013.

In 2013 an inventory study will be conducted in the province of Groningen, into the vulnerability of buildings as a result of earthquakes induced by gas production from the Groningen field. Where necessary, this study will lead to preventive measures being taken.

EBNâ&#x20AC;&#x2122;s portfolio of oil production for 2013 will comprise four producing fields. In 2013, one oil field is in development and the oil portfolio is expected to grow in the coming years.

38 | EBN Annual Report | 2012

In 2013, EBN expects roughly as many licences to be returned as requested. This applies to both exploration and production licences. The number of EBNâ&#x20AC;&#x2122;s participations therefore remains virtually constant.

According to EBNâ&#x20AC;&#x2122;s estimation, 18 exploration wells will be drilled in 2013. Of these, 12 are expected to be completed within the year. The budget for exploration expenses will rise, primarily due to higher costs for drilling installations.

There are also 15 fields in development, of which nine are expected to be taken into production in 2013.

EBN Annual Report | 2012 | 39

Guest column by Gerrit van Werven: Director of Energy Valley

What Eindhoven is to technology and Edam is to cheese, Groningen is to energy. With Energy Valley playing a crucial, central role . We started this initiative based on the conviction that ‘every region needs a business’. Today, our regional role is to boost, direct, mobilise, help, bind and advise.

Hub Here in the region, in the four northern provinces, innovation is high on the agenda and in full swing. There is a reservoir of proposed and promised investments for the coming years to the value of EUR 25 billion, which makes this the biggest investment programme in the Netherlands.

We are talking about cables, wind parks, gas pipelines, central storage, biomass, conversion – you name it. To a large extent, this has been initiated by Energy Valley. It’s our ambition to become a European energy hub in terms of both technology and applications. Where renewable energy is concerned, we aim to play a leading role in the energy transition and in developing programmes for that purpose. And although we are a regional energy centre, we are also expressly looking at areas outside the region.

In the future, we want to further expand this cluster to become the engine for energy management and the energy transition in Europe.

Integrated Gas plays a crucial role in the energy transition. We have plenty of gas and it’s a very convenient, pleasant form of energy. I am sure that the gas chain will change in the

40 | EBN Annual Report | 2012

“When it comes to renewable energy, you need gas.” long run and the position of gas will change. It will become

Expansion

extremely important in the transport sector, for example,

EBN has been a reliable, expert partner within the energy

and become closely associated with the electricity sector.

sector for many years. The organisation concentrates

We have a hybrid model at the moment – consumers are

on a part of the energy market, namely oil and gas. That

supplied with electricity and gas separately, but we will be

is fine in itself, but EBN could expand its profile. With its

moving to a far more complex, integrated situation. When

triple A status, EBN is perfectly positioned for making

it comes to renewable energy, you need gas. It’s cheaper

projects financeable. So why not also use that strength for

than electricity, partly because electricity is transported

renewable energy? I feel the state should draw far more

through high voltage cables and the energy value is not

on EBN’s knowledge. Take the offshore wind parks. Bil-

fixed. For gas, it is. In any event, it will not be possible to

lions of euros of government money are involved. Isn’t that

treat natural gas and electricity separately in the long run.

something you would rather do and participate in yourself – exercising influence, control and involvement? It comes

Plaything

extremely close to EBN’s competencies and expertise in

I can see a number of challenges at the moment. One

the field of logistics and infrastructure. EBN should build

of the major challenges is the imperfection of the energy

on and expand that expertise, harnessing its strength to

market. I consider it ridiculous that gas generating plants

promote sustainable forms of energy. That way, EBN can

are standing idle while coal is being imported and burned.

serve state interests even better than it does now.

At the same time, billions are being poured into clean gas.

That is perfidious. In my view, an entirely different financial

Accelerate

system has to be introduced, combined with a range of

Central in my vision of the future of energy supply is the

measures, such as lowering gas prices and taxing coal

triple helix. In other words: everything depends on co-

and carbon emissions. That automatically creates a new

operation from various perspectives and with different

market balance. We are currently actually favouring the

parties. For Energy Valley, these are knowledge institutes,

most polluting form while also investing billions in clean

research agencies and businesses. These three parties

energy. If you look at the National Energy Agreement,

interface when it comes to exchange and innovation in

the focus is largely on achieving that 16%. That is fine, of

the energy domain . And if you really want to get ahead

course, and it has to be done, but the real story, natu-

and accelerate, then they are crucial when it comes to

rally, is the remaining 84%. And natural gas should play a

providing investments and support. Of course, you can

central role there, too. There should be far more thought

also proceed on your own, but if you really want to make

put to how we are going to deal with that 84%. However,

progress, then you need all these parties.

it seems as if the debate on ‘clean’ has ground to a halt where it comes to the fossil element of the energy mix. In my opinion, that is not prudent and, as a result, we risk becoming the plaything of market forces. That is both undesirable and untenable.

EBN Annual Report | 2012 | 41

1967 42 | EBN Annual Report | 2012

Corporate Governance and Risk Management

3 EBN Annual Report | 2012 | 43

Corporate Governance and Risk Management Corporate Governance

with all relevant information that is needed for the general meeting of shareholders to exercise its authorities. Providing

Shareholder

relevant information is an obligation of the Executive Board

EBN is a private limited company with limited liability with

and the Supervisory Board.

the Dutch State as its sole shareholder. All shares are owned by the Ministry of Economic Affairs.

The shareholder appoints EBN’s Executive Board and

EBN’s authorised share capital is EUR 128,137,500 and is

Supervisory Board members. The Executive Board is

divided into 284,750 ordinary shares with a nominal value

appointed by the shareholder on the basis of a binding

of EUR 450 per share. The subscribed capital is equal to

nomination by the Supervisory Board. The Minister of Eco-

the authorised share capital. The shares were paid up in

nomic Affairs has to approve this nomination beforehand.

full as of 29 December 2005.

The members of the Supervisory Board are appointed by the shareholder on the basis of a nomination by the

One shareholders’ meeting was held in 2012. The Execu-

Supervisory Board. The shareholder appoints a chairman

tive Board and a number of members of the Supervisory

from the members of the Supervisory Board.

Board attended this shareholders’ meeting. During the annual general meeting of shareholders, in any circumstance

EBN’s articles of association also state that the Execu-

the following topics are dealt with:

tive Board requires prior approval by the shareholder for

— review of the written annual report by the Executive

certain decisions, for example entering into or terminating

Board on issues concerning the company and its

any sustainable collaboration or investment with a value

management

exceeding EUR 200 million, closing of the company, any

— adoption of the financial statements and determination of the profit appropriation — discharging the Executive Board of its responsibility for its management over the past financial year — discharging the Supervisory Board of its responsibility for supervision over the past financial year

of its subsidiaries or a significant part of the company and for decisions by the Executive Board concerning major changes to the identity or character of the company, including acquiring or hiving off a significant participation in the capital of another company and transferring the company to a third party.

The above topics were discussed during the shareholders’

Supervisory Board

meeting. The financial statements were adopted and

The chairman and the members of the Supervisory Board

the Executive Board and the supervisory directors were

are appointed by the shareholder. The Supervisory Board

discharged of their responsibility. In addition to the share-

is responsible for supervising the Executive Board’s policy

holders’ meeting, the Ministry also regularly conferred

and the general course of affairs within EBN and advises

informally with EBN. The objective of this informal discus-

the Executive Board where necessary and desired. In turn,

sion is, for instance, to provide shareholders promptly

the Executive Board provides the Supervisory Board with

44 | EBN Annual Report | 2012

Organisational structure

CEO Legal

HR

Commercial Department

Corporate Communication Office Management

Director Asset Management

Director Technology

Director Finance

Asset Groups

Technology Support

Business Control

GasTerra

Technology Projects & Innovation

Accounting & Reporting

Business Development

Technology Quality

Treasury

ICT

all necessary and relevant information to enable it to opti-

Executive Board

mally interpret and execute its tasks and responsibilities.

The Executive Board comprises one statutory director

EBN’s articles of association also state that the Executive

(Jan Dirk Bokhoven) and is responsible for the company’s

Board requires the approval of the Supervisory Board for

general policy and strategy with the company’s associated

certain decisions, such as defining amendments to the

risk profile. The Executive Board is also responsible for

exploitation budget and the investment and financing plan,

achieving the company’s objectives, the results achieved

appointing proxy-holders and making (dis)investments and

and the social aspects of business relevant to the company.

conducting other legal transactions to the value of more than EUR 50 million.

Where necessary, the Executive Board submits decisions to the shareholder or the Supervisory Board for approval.

The report by the Supervisory Board is on page 16 of this

It also ensures the proper functioning of the internal risk

report.

management and control system.

EBN Annual Report | 2012 | 45

The Executive Board is assisted by three functional direc-

Remuneration, other board memberships

tors: Thijs Starink (Director Asset Management); Berend

and conflicts of interest

Scheffers (Director Technology) and Jan Boekelman

The shareholder determines the policy for the team of

(Director Finance), who jointly form the team of Directors.

Directors remuneration. The Supervisory Board determines

The fourth functional director, who was in function as

the actual remuneration of the individual members of the

Director of Corporate Affairs during 2012, will resign in the

team of Directors within the frameworks of that policy,

course of 2013. The statutory director is chairman of the

including the team of Directors’ variable remuneration. The

team of Directors.

team of Directors’ variable remuneration is explained in the report by the Supervisory Board.

The organogram is shown on page 43.

Jan Dirk Bokhoven is a member of the Supervisory The team of Directors’ Regulations, which are approved

Board of GasTerra and a member of GasTerra’s board

by the Supervisory Board, divide the duties among the

of delegated supervisory directors.

members of the team of Directors. The team of Directors functions on the basis of joint responsibility. Within that joint

EBN endorses principle II.3 of the Corporate Governance

responsibility, the tasks are divided into functional areas.

Code that any form or suggestion of a conflict of interest

This specific task division is set down in writing. Each mem-

between the company and the team of Directors should

ber of the team of Directors is responsible for preparing

be avoided. The articles of association and the team of

policy matters and decisions in his or her own operational

Directors Regulations include a regulation concerning

area. After decision-making within the team of Directors, the

(potential) conflicts of interest between the team of Direc-

members of the team of Directors ensure the prompt imple-

tors and the company. Any (potential) conflicting interest of

mentation of the decisions made. In principle, the team of

material significance must be immediately reported to the

Directors meets once every two weeks.

chairman of the Supervisory Board. No incidences were reported by the team of Directors in 2012.

In the annual report, the Executive Board gives a description of the primary risks related to EBN’s strategy, the

Even distribution of seats on the team of

structure and functioning of the internal risk management

Directors and the Supervisory Board

and control systems with regard to the primary risks related

In 2012, no seats became vacant on the team of Directors

to EBN’s strategy and any shortcomings in the internal risk

or the Supervisory Board that were filled otherwise than

management and control systems detected in the financial

by the reappointment of a supervisory director, to ensure

year, any significant amendments that have been made and

the continuity of the functioning of the Supervisory Board.

any important improvements that have been proposed. For

The division of seats between women and men in 2011

this description, please refer to page 46.

therefore remained unchanged in 2012. As soon as a vacancy arises that is not filled by reappointment, action is taken to achieve a division complying with article 2:276 of the Dutch Civil Code.

46 | EBN Annual Report | 2012

External auditors

the Corporate Governance Code principle that transparency

The shareholder is responsible for appointing the external

towards stakeholders is crucial. We do, accordingly, follow

auditors, with the Supervisory Board having a right of nomi-

a number of the code’s principles(1), whereby, however,

nation. In 2011, Ernst & Young was appointed to audit the

not all best practice provisions included in these Corporate

financial statements for the years 2012, 2013 and 2014.

Governance Code principles are applicable to EBN. The specific principles and best practices we do follow have

Code of conduct, complaints board

been elaborated upon in EBN’s articles of association

and confidant(e)

and regulations are a conduct guideline for the Executive

As we attach importance to transparency and clarity

Board, the Supervisory Board and the shareholder. You

externally, that also applies within the confines of our or-

can read the full Corporate Governance Code at

ganisation. EBN has a code of conduct that is accessible

http://commissiecorporategovernance.nl

and applicable to all employees. This provides a guideline for making personal choices and individual decisions. We

Risk management

also use the code of conduct to test the actual conduct

Risk management is an essential part of EBN’s operational

of the company and its employees. In the event of internal

management. It enables our organisation to constantly

complaints, employees can approach a confidant(e) or

maintain a good overview of the strategic and operational

the complaints board. Neither the confidant(e) nor the

opportunities and risks, and respond effectively to them.

complaints board received or dealt with any complaints in

When identifying these opportunities and risks, we do not

2012. The code of conduct is available at

rely solely on structural elements, such as analyses and

www.ebn.nl/documents/gedragscode_EBN.pdf

reports; we also focus specifically and consistently on the risk awareness and integrity within the organisation.

Regulations protecting whistle-blowers On the basis of the regulations protecting whistle-blowers,

Risk management structure

employees can report any alleged abuse to the Executive

To structure and manage our operational activities, we

Board or the Supervisory Board. No alleged incidences of

use the ‘EBN Framework’. This consists of four individual

abuse were reported in 2012. The regulations protecting

pillars, within which various activities are identified and

whistle-blowers are available at

carried out coherently. Risk management constitutes a

www.ebn.nl/documents/klokkenluidersregeling_EBN.pdf

fundamental, integral part of the entire framework. In essence, the aim is:

Application of the Corporate Governance Code As EBN qualifies as a state participation, the company

— to analyse opportunities and risks based on the organisation’s strategy

adheres to the government’s policy, which stipulates that

— to formulate and implement control regulations

state participations must follow the Corporate Governance

— to test the effectiveness of the control measures

Code. Although EBN is not a listed company and is not

The figure on page 46 represents the EBN Framework,

obliged to apply the code for that reason, it does endorse

including the major risk management elements per pillar.

(1) EBN complies with the following principles of the Corporate Governance Code: II.1 Executive Board: role and procedures, II.3 Executive Board: conflicts of interest, III.1 Supervisory Board: role and procedures, III.2 Supervisory Board: independence, III.3 Supervisory Board: expertise and composition, III.4 Supervisory Board: the chairman of the Supervisory Board and the company secretary, III.5 Supervisory Board: composition and role of the board’s three key committees, III.6 Supervisory Board: conflicts of interest, III.7 Supervisory Board: remuneration, V.1 Financial reporting, V.2 Role, appointment, reward and performance evaluation of the external auditors, V.3 and V.4 External auditors’ relationship and communication with the company’s bodies.

EBN Annual Report | 2012 | 47

Risks and opportunities

Risk management

Based on our organisationâ&#x20AC;&#x2122;s strategic objectives, the

To manage risks as efficiently as possible, measures are

Executive Board carries out an annual strategic risk analy-

formulated and implemented where necessary on the

sis, which analyses both the opportunities and risks for

basis of the strategic and operational risk analyses. These

achieving these objectives. The departments within EBN

are then embedded in the EBN working processes, of

carry out an annual operational risk analyses. During these

which the most important are described in detail and

analyses risks are identified and it is assessed whether

recorded centrally. The working processes are available to

these risks are effectively managed. The analysis also

all employees on our intranet, under â&#x20AC;&#x2DC;Integral Management

investigate whether opportunities are being adequately

Systemâ&#x20AC;&#x2122;.

identified and capitalised upon. Both the strategic and the operational risk analyses were carried out in 2012.

Each year, EBN establishes a working programme and budget, the WP&B. This defines the ambitions, plans and activities for that year at both organisational and

Risk management Strategic Risk Analysis (SRA)

EBN strategy

Operational Risk Analyses (ORAs)

Annual working programme and budget

Vision, mission and strategy

Risks and opportunities

Effectiveness assurance

Control

Self evaluations In control statements Internal audits Joint venture audits External audit Following up internal and external audits

48 | EBN Annual Report | 2012

Defined working processes Planning & control cycle / performance measurement Policy, regulations, codes

departmental level. The planning and control cycle is used

The findings of these audits are presented and explained

throughout the year to check the degree to which the

to the Executive Board and the most important points are

objectives included in the WP&B are being achieved. To

discussed with the Supervisory Board’s audit committee.

that end, monthly and quarterly management reports are

The internal audits also resulted in findings in the year un-

compiled, which are discussed at various levels within

der review. Actions have been defined to deal with them,

the organisation. Where necessary, actions can be taken

‘owners’ are appointed and end dates determined. The

based on these reports.

team of Directors periodically monitors the implementation of the actions.

Within the framework of risk management, EBN publishes internal policy documents and internal regulations, such

In addition to internal audits, in 2012 EBN also conducted

as the authorisation and procuration regulations, on its

a financial audit of the costs charged on to our organisa-

intranet, making them accessible and available to all

tion within the framework of various partnerships.

employees.

Financial markets The effect of control measures

To achieve our strategic objectives, we depend on good

The design and operating effectiveness of the control

access to the capital markets, effective currency and inte-

measures is tested annually. This was done in 2012,

rest rate risk management and sound creditworthiness of

as usual, through open, informal sessions, in which the

our financial counterparts. How these aspects are managed

department manager carries out a self-evaluation of the

are described starting page 78 of the annual report.

major control measures with his or her staff and discusses their design and operating effectiveness. Where necessary,

Risk profile

concrete actions are defined for improving the control

Each year, EBN does its utmost to achieve its strategic

level. The results of the self-evaluations are reported to the

objectives for the short and long term. Naturally, it is

Executive Board, with the department managers issuing

inevitable that risks and uncertainties occur that affect the

an ‘in control statement’. This states that the major risks

actual execution of these plans to one degree or another.

in their area of responsibility have been identified and

The major and most topical of these are described below.

explains whether they are being adequately managed.

Support for gas and oil production In 2012, like every year, a number of internal audits were

It is essential to have sufficient societal support for natural

carried out. These are aimed at evaluating the quality and

gas and oil exploration and production. EBN therefore

effectiveness of important working processes and/or a

attaches great value to clear communication on the role of

number of specific themes within those working pro-

natural gas in the Netherlands. We also feel it is important to

cesses. In 2012, internal audits were carried out for the

inform stakeholders proactively, factually and transparently

salary administration and processing, integrity and system

regarding specific activities and to use actual projects to

security.

demonstrate in practice how the production of natural gas

EBN Annual Report | 2012 | 49

can be embedded into the natural living environment. This,

vestigate the possibilities for further optimising the invest-

we do by listening to and learning from stakeholders. We

ment climate and, together with the government, mobilise

also encourage a safe production process that minimises

the sector and knowledge institutions to achieve this aim.

environmental impact.

We will also actively draw national and international attention to the possibilities for natural gas exploration and

Share of gas in the energy mix

production in the Netherlands.

Natural gas potentially plays an essential role in the transition to the use of renewable energy sources. Natural gas

External factors

is the cleanest fossil fuel and, moreover, it forms a natural

If an extended period of low market prices would occur,

combination with renewable energy, such as solar and

there is a risk of oil and gas companies investing less. EBN

wind power, as it is flexibly deployable.

continuously monitors the development of gas prices. EBN does not, however, take any measures such as hedging

However, with increasing energy production from coal,

to control the risk of fluctuating market prices. Due to our

as a result of the relatively low coal price, there is a risk of

low operational cost structure, low market prices have little

natural gasâ&#x20AC;&#x2122; potential role not being realised. EBN there-

effect on EBNâ&#x20AC;&#x2122;s continuity.

fore considers it important to convey the potential and importance of natural gas in the energy transition and

Executive Board statement

enter into broad social dialogue on the topic.

The Executive Board is responsible to maintain an adequate internal control structure and for the evaluating of its

Investment climate and critical infrastructure

effectiveness. During the financial year, the actual business

If the investment climate for natural gas and oil exploration

performance is periodically compared with the approved

and production is unfavourable, oil and gas companies

plans and budgets, and discussed during the Executive

will increasingly shift their priorities to countries where they

Board meetings. The Executive Board declares that the

can earn a better return on investment. That also means

financial reporting systems operated properly during the

the Netherlands are unable to attract sufficient new inves-

year under review and provide a reasonable degree of

tors. The result will be lower investments in Dutch gas and

assurance that the financial statements do not contain

oil production in general and in the application of new in-

any material misstatements.

novative technology in particular. Without the necessary investments, the existing infrastructure will also be removed prematurely. For offshore gas production, it is essential that the critical infrastructure will be retained as long as possible, to facilitate the development of new fields.

Otherwise, there is a risk that the level of natural gas and oil production will trail behind in the long term. EBN will in-

50 | EBN Annual Report | 2012

EBN Annual Report | 2012 | 51

Guest column by Ron Wit: Team manager for climate and energy at Stichting Natuur & Milieu, the Netherlands Society for Nature and Environment Energy is important in people’s lives.

Without energy, we cannot drive cars, we have no light and no water. Major changes and interventions will therefore always affect individuals’ lives.

Moreover, making energy more sustainable leads to energy forms with a higher impact on the spatial environment. All in all, this will involve an unparalleled energy transition In the Netherlands, the fairy-tale of flexible gas generating stations and more renewable electricity together determining a sustainable future has gone up in smoke. In reality, the electricity sector is not adhering to it and the market seems to be entirely focusing on coal. In this respect, there is a gap between the intended transition and the whims of the market.

Progress In the Netherlands, we are always talking about objectives.

We talk about the 16% renewable energy target in terms of ‘Isn’t it too much?’ and ‘Won’t it be too expensive?’

But that discussion is not in the interest of the necessary investment security of a rapidly-growing clean technology industry. Worse still, it’s an excuse for postponing things and not making any progress. We need to talk less about objectives and more about what is really needed.

This year, it would be a good idea for the cabinet to announce the volumes contracted annually for offshore wind

52 | EBN Annual Report | 2012

“We are champions when it comes to talking about objectives, but we are not making any progress.” energy generation. That would give a tremendous boost

the climate objectives. It means we are not benefiting fully

to the sector, as companies can then be sure there will

from the value it can offer our economy. We should see

be sufficient volume in the market to justify innovation and

it from an economic point of view: our level of energy ef-

investment. This confidence is key. Moreover, there is suffi-

ficiency is among the worse in Europe and is deteriorating.

cient money reserved in the coalition agreement to finance

This affects our competitiveness and therefore our eco-

the unprofitable top of such a contracting plan. Naturally,

nomy. We have to shift to a situation where energy saving

it’s good that an Energy Agreement is being developed for

is an economic objective, a business case.

up to 2030 and beyond, but we should not let that distract us from what needs to be done today. We are champi-

Leading in terms of climate policy can harm our compe-

ons when it comes to talking about objectives, but not in

titive position. But when it comes to energy saving, the

acting upon them.

opposite applies. If the rest of the world is doing little when it comes to climate policy, then fossil fuel prices will rise

Bogged down

and we can earn a lot of money with energy saving. The

I had the privilege of being involved in the process for

payback time for energy-saving investments then beco-

the energy agreement. I have always wondered how the

mes shorter and the benefits will outweigh the costs for

Netherlands can have remained stationary for the past ten

the country.

years when it comes to sustainability. I think it’s because everyone talks about technology and tools, but when it co-

Dream will suffer

mes down to it we get bogged down. In this country, we

We have to take care that natural gas as a transition fuel

always pay too much attention to content and too little to

does not become a marketing concept – a good story

the underlying interests. Also today, there is too much talk

without anything to back it up. Admittedly, natural gas is

of content and figures, while we are unwilling or unable

flexible, but that alone is not enough to earn it a sustai-

to quantify the interests and find out more about them

nable image. In that respect, the gas sector will have to

from each other. Dare to agree to a second best; 100%

do more to realise the importance of natural gas in the

agreement may not be able to muster sufficient support.

transition. In theory, it can play an extremely important role

An analysis has never been made of why we fail to make

but, as I said, the market is inexorable. So what do you do

progress together, but these are largely the reasons.

then? Look at the present situation: idle gas generating

Only if we stand shoulder to shoulder and bridge the gap

stations, coal-fired stations running full blast. It’s high time

between our mutual interests will we really move forward.

that the established gas sector dared to take a political stand: “We want substantially higher CO2 prices!” Other-

Competitiveness

wise, your dream will suffer.

The major challenge at the moment is energy saving: everyone is for it, but nobody is really doing it. The risk is that we only pay lip service. I consider it a strategic loss that energy saving is primarily seen as a means to achieving

EBN Annual Report | 2012 | 53

Founding of DSM Aardgas B.V.

1973

54 | EBN Annual Report | 2012

FINANCIAL STATEMENTS

4 EBN Annual Report | 2012 | 55

General

The Executive Board has prepared and, by resolution

nated on consolidation level. The results of the subsidiaries

of 20 March 2013, formally approved the financial state-

acquired or hived off in the course of the year are entered

ments of EBN B.V. (EBN) for the 2012 financial year.

in the consolidated profit and loss account from the date

The financial statements were subsequently submitted to

of acquisition or until the date of hiving off, as appropriate.

the Supervisory Board. EBN is a private limited company with limited liability, based and with its business premises

The financial statements of EBN pertain mainly to EBN’s

in the Netherlands and with its registered office in Utrecht.

share in joint ventures in the field of oil and gas production

EBN was established on 2 January 1973 in Maastricht.

in the Netherlands and the Dutch part of the continental

Pursuant to Article 20.2 of the articles of association the

shelf. The information shown relates to EBN’s share in

Supervisory Board also provides a preliminary recommen-

the assets and liabilities, as well as in the revenues and

dation to the shareholders. The financial statements will

expenses of such joint ventures. EBN also participates

be submitted to the General Meeting of Shareholders on

in a number of companies.

18 April 2013, where they will be adopted and subsequently published. All shares in EBN are held by the

Joint ventures

Dutch State.

Joint ventures are defined as contractual or other company cooperation agreements with partners with whom EBN

The consolidated financial statements of EBN for the

jointly performs operations. These operations use assets

2012 financial year include the company and its subsi-

that are jointly controlled by EBN and its partners. EBN

diary EBN Capital B.V. (created on 15 November 2012

accounts proportionally for these joint assets and related

from the merger of K13 Extensie Beheer B.V. and F3/

liabilities, expenses and revenues in the financial statements.

A6 Extensie B.V.) and have been prepared in accordance with the International Financial Reporting Standards (IFRS)

The Maatschap Groningen [Groningen Partnership] is the

and interpretations of the International Financial Reporting

main joint venture. In total, EBN participates in 27 onshore

Interpretations Committee (IFRIC) as applicable on 31

production licences, 101 offshore production licences, 48

December 2012 and as adopted by the European Union

exploration licences, the Emmen gas purification plant and

and section 9, Book 2 of the Dutch civil code.

4 underground natural gas storage facilities. The participation percentages in these joint ventures range from 40%

The consolidated financial statements incorporate the

to 50%. EBN also participates in the K13-Den Helder gas

financial statements of EBN and the entities over which

processing plant and pipeline, the K13-Extension pipeline

EBN has control. EBN has control of a subsidiary if EBN

(through a subsidiary) and the F3/A6 Extension pipeline

is able to determine the subsidiary’s financial policy and

(through a subsidiary).

corporate policy in order to obtain benefit from its activities. The subsidiary’s financial statements are compiled on

EBN is the sole shareholder of EBN Capital B.V. as a result

the basis of the same principles as EBN. All transactions,

of the above participations in the K13 Extension and F3/

balances, assets and liabilities within the Group are elimi-

A6 Extension pipelines.

56 | EBN Annual Report | 2012

Associates EBN has a 40% participation in GasTerra B.V. GasTerra B.V. is seated in Groningen and its core activity is trading in gas. EBN also has a 45% participation in NOGAT B.V. and a 12% participation in NGT Extensie. The core activity of these organisations is gas transport from the North Sea.

EBN Annual Report | 2012 | 57

Principles for the valuation of assets and liabilities and determination of profit The financial statements have been prepared in accor-

A tangible asset is no longer included in the balance sheet

dance with the historical cost convention and on going

once it has been divested or when no future economic

concern basis, unless stated otherwise.

benefits are expected from its future use, or if the licence is returned or sold. Any profit or loss ensuing from the

Conversion of foreign currencies

asset that is no longer included in the balance sheet is

The euro is the operating and reporting currency of EBN.

incorporated into the result.

This also applies to its joint ventures. Commercial transactions and borrowings in foreign currencies are shown

Exploration assets

in the financial statements at the spot exchange rates

EBN capitalises and amortises expenditure on exploration.

applying on the transaction dates. Balance sheet items

Exependitures on the activities listed below are capitalised

denominated in foreign currencies are converted at the

and amortised as part of the exploration and evaluation

spot exchange rates applying on the balance sheet date.

assets: Acquisition of exploration licences, exploration

Differences in exchange rates resulting from settlement of

drilling, trenching (surveying by means of soil sections),

these transactions and conversion of balance sheet items

sampling and activities related to evaluating the technical

are charged to the profit for the year.

and commercial possibilities for extracting minerals.

Current versus non-current assets and liabilities

The costs of the following are not capitalised or amortised:

An asset is classed as current if it is expected to be rea-

surveys, unless they are related to existing and proven

lised within 12 months of the balance sheet date. A liability

reserves (e.g. to determine the best place to drill).

or debt is classified as current if it will be settled within 12

If such costs are considered to be part of the partner

months of the balance sheet date.

reimbursement then they are capitalised and amortised.

topographical, geological, geochemical and geophysical

Partner reimbursements are generally made when pro-

Property, plant and equipment

duction seems feasible. That provides more certainty than

Tangible fixed assets for production

when the surveys are carried out independently.

The tangible fixed asset for gas and oil production and the other operational equipment are valued at purchase

Exploration wells

value minus depreciation and any impairment losses.

Expenses for exploration wells are capitalised (wells under

Replacement investments constituting an improvement

construction). If an exploration well turns out to be dry,

are capitalised and amortised and identical replacement

the costs incurred are charged to comprehensive income.

investments are charged to the profit and loss account.

These assets are not depreciated as long as there is no

The estimated costs of decommissioning, dismantling and

production from a gas or oil exploration well.

removal of platforms and other installations are capitalised and amortised as part of the purchase value of the tangi-

Expenses related to exploration wells that are older than

ble asset in question.

12 months are charged to comprehensive income, unless:

58 | EBN Annual Report | 2012

1) they are located in an area where significant capital

Petroleum Resources Management System. The reserves

expenditure is required before production can com-

are based on the current estimates of EBN’s proven

mence, and

reserves and production profiles.

2) commercially recoverable quantities have been found, and 3) further exploration or appraisal activities are taking

Other property, plant and equipment are depreciated on a straight line basis over their estimated useful economic

place, i.e. additional exploration wells are being drilled

life. For trunk transport pipelines and facilities for the

or there are definite plans to do this in the near future.

underground storage of natural gas (UGSs), an economic life of ten years is assumed. Land is not depreciated. The

Management regularly evaluates, on the basis of the

estimated remaining economic life of this property, plant

above criteria, whether it is still appropriate to capitalise

and equipment is tested annually, taking into account

expenses relating to exploration drilling, and whether the

economic and technological obsolescence and normal

drilling activities can be continued. Exploration wells older

wear and tear.

than 12 months are additionally evaluated to determine whether any facts or circumstances have changed and whether the above criteria still apply.

Capital expenditure and wells under construction Capital expenditure and wells under construction are not

Reimbursement of partners

depreciated.

The costs of reimbursements paid to partners – mainly exploration costs and interest payments related to proven

Financing costs of projects

reserves – are capitalised and amortised on the basis of

Financing costs of projects are capitalised. The interest

the Unit-of-Production method (see next section for more

rate used for the financial year is based on the average

information).

interest rate applying on long-term borrowings in the past financial year.

Depreciation Tangible fixed assets for gas and oil production are

Associates

depreciated on the basis of the Unit-of-Production (UoP)

An associate is an interest in an entity on which EBN can

method: The ratio between the production in the financial

exert significant influence, but over which it cannot exer-

year and the PRMS reserve classification of proven reserves

cise decisive control. Associates are shown in accordance

(category 1) as at 31 December of the financial year. The

with the equity method. This means that EBN’s share in

reserves are determined in accordance with the definitions

an associate is shown as EBN’s share in the net assets of

laid down by the Society of Petroleum Engineers (SPE),

this entity, less any impairment. EBN’s share in the profit or

World Petroleum Council (WPC), American Association of

loss of the associate is charged to comprehensive income.

Petroleum Geologists (AAPG) and Society of Petroleum

If EBN’s share in the loss of an associate exceeds the

Evaluation Engineers (SPEE) and are recorded in the

carrying amount of that associate, including any other

EBN Annual Report | 2012 | 59

receivables, the carrying amount is reduced to nil. No

prices or net realisable values. Inventories of above-ground

further losses are accounted for unless EBN has assu-

condensate and oil are shown at their net realisable values

med responsibility for the associate through a guarantee

at the year-end.

or other commitments. Unrealised gains and losses on transactions with associates are eliminated in proportion to

Receivables

EBN’s share in these associates.

Receivables are shown at amortised cost less any amount deemed necessary for bad and doubtful debts. On first

Impairment

recognition, receivables are shown at fair value.

An assessment is made on each balance sheet date as to whether the carrying amount of a non-current asset

Cash and cash equivalents

(property, plant and equipment or associate) exceeds its

Cash and cash equivalents are cash in hand, bank balan-

realisable value (the higher of the indirect and direct reali-

ces and deposits at banks with a remaining term to matu-

sable values). If so, the value of the asset will be deemed

rity of less than three months. Amounts owed to banks are

to be impaired. If an asset does not generate sufficient

shown as current liabilities.

independent cash flow, the realisable value is determined for the cash-generating unit to which the asset belongs.

Shareholder’s equity

A typical EBN property, plant and equipment type cash-

EBN’s shareholder’s equity consists of share capital and

generating unit is a concession. To determine the indirect

any dividend declared. The Dutch State is EBN’s sole

realisable value, estimated future cash flows are discoun-

shareholder. The dividend payable to this shareholder is

ted at a rate before taxes, on the basis of the market

shown as a liability in the period for which it is due, in ac-

interest rate, plus a mark-up for the asset’s specific risks.

cordance with EBN’s articles of association. An exception

EBN uses the WACC (Weighted Average Cost of Capital)

to this rule is made for the proposed final dividend, which

for this calculation.

does not become a liability until it has been approved by the General Meeting of Shareholders.

If the realisable value of an asset is lower than the carrying amount, the carrying amount will be reduced to the

Provisions

realisable value. Impairment can be reversed, either wholly

Provisions are shown in the balance sheet if the following

or partially, in the event of a change in the estimate that is

conditions are satisfied:

of significance for determining the realisable value.

1) there is a legal or actual obligation as a consequence

Impairment is shown as a separate item in the statement of comprehensive income.

of an event in the past, and 2) it is likely that assets will be withdrawn from the company in order to meet this obligation, and

Inventories

3) the amount of the obligation can be reliably estimated.

Inventories of gas stored underground and materials and equipment are shown at the lower of average purchase

60 | EBN Annual Report | 2012

If the effect of the time value of money is material, provisi-

ons are determined by calculating the present value of the

provide the information required to determine and specify

forecast cash flows at a discount rate before tax. Once

EBN’s share in the underlying pension obligations, fund

the present value has been calculated, any increase in

investments and costs of the scheme in a consistent and

provisions as a result of the passing of time is shown as

reliable manner.

interest expense. The provision for deferred tax liabilities is not discounted.

Contingent assets and liabilities Contingent assets and liabilities are not shown in the

The provision for decommissioning and restoration costs

balance sheet.

is designed to cover the expected estimated costs of decommissioning, dismantling, and land restoration on the

Emission rights

basis of present-day requirements, technology and price

As a result of its interests in the various joint ventures, EBN

estimates. The amount of this provision is based on infor-

must comply with legislation designed to reduce green-

mation provided to EBN by the operators. Any changes in

house gas emissions. The operator trades the emission

this information will, after EBN has made its own assess-

rights on behalf of the joint venture partners.

ment, generally result in a corresponding change in the capitalisation of decommissioning and restoration costs of

The operator reserves emission rights in order to be

the relevant property, plant and equipment. The provision

able to satisfy delivery obligations. These rights are not

for ground subsidence is designed to cover certain additi-

shown in the balance sheet. Income is reported when the

onal liabilities arising during the production phase.

operator sells EBN’s share in surplus emission rights. If the operator has to purchase additional emission rights, EBN

Liabilities

records an expense item to the extent of its share.

Outstanding borrowings are shown at amortised cost. On first recognition, such items are shown at fair value less

Net sales

costs. Borrowings in foreign currencies are converted at

Net sales from the sale of gas, oil and condensate are ac-

the exchange rates applying on the balance sheet date.

counted for at the time of delivery, which is when owner-

Premiums or discounts on borrowings are amortised

ship of and the risks associated with the delivered goods

during the term to maturity of the loan concerned. Interest

pass to the buyer. Revenues from oil and gas production

expense is charged to the result in the period to which it

generated from assets in which EBN participates with

pertains, using the effective interest rate method.

other producers are shown in proportion to EBN’s relative interest in these assets.

Pensions EBN provides a defined benefit pension scheme, which is

Operating expenses

managed as part of the ABP pension fund. In its financial

Expenses are determined on the basis of historical costs.

statements EBN treats the scheme as a defined contribution

These include the share in the expenses of the joint ven-

pension scheme because the pension fund is unable to

ture that corresponds with EBN’s interest, as well as the

EBN Annual Report | 2012 | 61

costs of managing the joint venture. Operational costs also

Financial derivatives

include levies out to the Dutch State.

Financial derivatives are shown at fair value on initial recognition and then at the current fair value prevailing on

Financial income and expense

each subsequent balance sheet date. Any resultant gains

Interest income and interest expense are shown on a time-

or losses are charged to comprehensive income. EBN

proportionate basis. Interest expense also includes interest

does not apply hedge accounting.

accrued on provisions.

Share of profit from associates

International Financial Reporting Standards (IFRS)

The share in the profit from associates is shown as the

The 2012 financial statements take into account the conse-

share of the profit for the year under review corresponding

quences of the following standard, the application of which

with EBN’s interest, after deduction of taxes.

has been in force since the start of the 2012 financial year:

Taxes

— IFRS 7 Financial Instruments: Disclosures - Amendment

Taxes on profits are determined in accordance with the

to Disclosures

balance sheet method. Tax liabilities are specified in the statement of comprehensive income except insofar as

EBN has opted not to apply the following standards,

they relate to an item included in other comprehensive

amendments to standards and interpretations which have

income.

not yet come into force or which have not yet been adopted by the European Union:

Current tax expenses are taxes that are expected to be

— IFRS 9 Financial Instruments

payable on the taxable profit for the year, based on the

— IFRS 10 Consolidated Financial Statements

tax rates applying on the balance sheet date, net of any

— IFRS 11 Joint Arrangements

adjustments for taxes payable in respect of previous years.

— IFRS 12 Disclosure of Interests in Other Entities — IFRS 13 Fair Value Measurement

Deferred tax assets and liabilities are shown on the basis

— IAS 1 Presentation of Financial Statements

of the expected fiscal consequences of temporary dif-

— IAS 12 Income Taxes - Recovery of Tax Assets

ferences between the fiscal and commercial carrying

— IAS 16 Property Plant and Equipment

amounts of assets and liabilities. Deferred tax assets and

— IAS 19 Employee Benefits

liabilities are calculated on the basis of the tax rates that

— IAS 28 Investments in Associates and Joint Ventures

are applicable or materially determined on the balance

— IAS 32 Offsetting Financial Assets and Financial

sheet date, and in accordance with the tax regulations

Liabilities & Financial Instruments, Presentation

expected to apply when the specific deferred assets and

— IAS 34 Interim Financial Reporting

liabilities are settled.

— IFRIC 20 Stripping Cost in the Production Phase of a Surface Mine

62 | EBN Annual Report | 2012

Start offshore gas production

1975 EBN Annual Report | 2012 | 63

Change of name: DSM Aardgas becomes EBN

1989 64 | EBN Annual Report | 2012

EBN is investigating the consequences of the standards, amendments to standards and interpretations. On the basis of the provisional results, EBN does not expect the application of these new standards, amendments to standards or new IFRIC interpretations to have any material consequences for the companyâ&#x20AC;&#x2122;s financial statements in future financial years.

EBN Annual Report | 2012 | 65

Consolidated statement of comprehensive income In EUR million

note

2012

changes in relation to 2011

2011

net sales

2

8,528

20%

7,103

levies

3

3,801

2,964

operational costs

4

797

658

depreciation and amortization

5

745

617

operating expenses

5,343

26%

4,239

operating profit

3,185

11%

2,864

financial income

6

99

139

financial expenses

6

-201

-232

share of profit from associates

7

48

53

pre-tax profit

3,131

11%

2,824

taxes

8

-771

11%

-693

net profit

9

2,360

11%

2,131

other comprehensive income

total comprehensive income

66 | EBN Annual Report | 2012

-

2,360

-

11%

2,131

Consolidated balance sheet In EUR million

note

year-end 2012

year-end 2011

property, plant and equipment

10

3,911

4,206

associates

11

112

113

4,023

4,319

assets

non-current assets

liabilities

shareholderâ&#x20AC;&#x2122;s equity

note

year-end 2012

year-end 2011

128

128

14

share capital retained earnings

72

76

200

204

15

1,957

2,033

8

135

120

borrowings

16

1,652

1,733

other

17

non-current liabilities provisions deferred tax liabilities

16

16

3,760

3,902

373

713

current assets inventories

12

40

68

receivables

13

1,079

1,085

-

80

257

327

deferred tax credits derivatives cash and cash equivalents

total

19

366

9

1,742

1,569

5,765

5,888

current liabilities borrowings

16

tax other

18

derivatives

19

total

110

96

1,289

956

33

17

1,805

1,782

5,765

5,888

EBN Annual Report | 2012 | 67

Summary of changes in shareholderâ&#x20AC;&#x2122;s equity In EUR million

share capital

retained earnings

total equity

128

46

174

net profit

-

2,131

2,131

other comprehensive income

-

-

-

total comprehensive income

-

2,131

final dividend 2010

-

-46

-46

interim dividend

.

-2,055

-2,055

128

76

204

net profit

-

2,360

2,360

other comprehensive income

-

-

-

total comprehensive income

-

2,360

2,360

final dividend 2011

-

-76

-76

interim dividend

-

-2,288

-2,288

128

72

200

balance as at 1 January 2011

balance as at 31 December 2011

balance as at 31 December 2012

The retained profit at year-end 2012 of EUR 72 million represents the proposed final dividend. Total earnings per share for 2012 amounted to EUR 8,288, which was an increase of 11% in relation to 2011.

For more information, please refer to note 14.

68 | EBN Annual Report | 2012

Consolidated statement of cash flows In EUR million

2012

2011

2,360

2,131

operating activities net profit from continuing activities conversion to net cash from operating activities - income from participations

-48

-53

- depreciation and amortization

745

617

- change in provisions

64

19

- writing off dry wells

50

28

- interest

- charged to comprehensive income

97

93

- taxes

- charged to comprehensive income

771

693

conversion to net cash provided by operating activities - change in working capital

- inventories - receivables -c urrent liabilities (excluding loans, debts to credit institutions and profit distribution

- withdrawals provision - interest

- received - paid

- taxes

- received - paid

28

-29

6

159

79

-393

-13

-

57

45

-78

-69

80

0

-753

-717

net cash from operating activities

1,085

391

3,445

2,522

investing activities property, plant and equipment dividend received

-621

-611

48

53 -573

kasstroom aangewend voor investeringsactiviteiten

-558

net cash used in investing activities profit distribution loans taken up

-2.102

-2.320

300

415

loans repaid

-289

-

change in debts to credit institutions

-425

-79

net cash from financing activities change in cash and cash equivalents balance cash and cash equivalents at 1 January balance cash and cash equivalents at 31 December

-2,516

-1,984

357

-20

9

29

366

9

EBN Annual Report | 2012 | 69

Notes to the consolidated financial statements (1) General information

Realisable value

All amounts in these explanatory notes are in millions of

The estimation of the realisable value of assets is partly

euros unless otherwise stated.

based on the reserves, production profiles, estimated future sales prices and the WACC.

The company profit and loss account As permitted by section 402, Book 2 of the Dutch Civil

The Executive Board emphasizes that future events may

Code, the company profit and loss account is presented

differ from projections and that estimates have to be

in a condensed format.

adjusted regularly.

Estimates and assessments Estimates and assessments have to be made in the preparation of the financial statements. These have consequences for the amounts reported for assets and liabilities, income and expenditure items and the related reporting of contingent assets and liabilities on the date of the financial statements. Results can be influenced by such estimates and assessments. In those cases, these explanatory notes set out the principles that management considers to be most important and that are usually the most difficult to estimate due to intrinsic uncertainties.

Decommissioning and storage costs The provision in the balance sheet for decommissioning and storage costs and the capitalisation and amortisation of those costs is based on information from operators and our own analyses. For further explanation of how that provision is calculated, please refer to the “Principles for the valuation of assets and liabilities and determination of profit”, paragraph “Provisions”, on page 59.

Reserves EBN determines the gas and oil reserves in accordance with definitions set down by SPE, WPC, AAPG and SPEE in the PRMS.

70 | EBN Annual Report | 2012

Notes to the statement of comprehensive income (2) Net sales

million gross wages (2011: EUR 6.6 million), EUR 0.5 mil-

EBN performs one main activity: exploration for and

lion social charges (2011: EUR 0.3 million), EUR 1.2 million

production of natural gas and oil. All sales are realised in

pension costs (2011: EUR 1.1 million) and EUR 0.1 million

the Netherlands. The assets in which EBN participates are

other costs (2011: EUR 0.5 million).

also located in the Netherlands. Information on the main debtors can be found in note 22.

As at the balance sheet date, the company did not have any contractual obligations â&#x20AC;&#x201C; other than the possibility of

Net sales in 2012 from ordinary activities amounted to

higher contributions in future â&#x20AC;&#x201C; to pay additional amounts

EUR 8,528 million, representing an increase of EUR 1,425

in the event of the pension fund being in deficit.

million in relation to 2011 (20%).

The increase in sales was mainly due to higher sales pri-

(5) Depreciation and amortization

ces (18%) and higher gas sales (2%). Sales volumes for oil 2012

2011

depreciation of property, plant and equipment

574

565

171

52

745

617

In EUR million

and condensate were also higher than in 2011.

(3 and 4) Levies and operational costs In EUR million

2012

2011

depreciation of property, plant and equipment by reason of decommissioning and restoration

levies

3,801

2,964

total

797

658

operational costs

The higher depreciation and amortisation costs were Levies were EUR 837 million (28%) higher than in 2011.

primarily caused by the fact that in 2011 there was a

This item mainly comprises the special payments made to

substantial addition to the capitalised and amortised

the Dutch State in respect of production from the Gro-

decommissioning and storage costs. This led to higher

ningen field in 2012, i.e. the MOR payments, amounting

depreciation costs in relation to 2011, at EUR 128 million.

to EUR 3,668 million and the Stateâ&#x20AC;&#x2122;s share of EUR 126

For further information please refer to note 10.

million. The increase in payments in 2012 was primarily as a result of higher sales volumes and a higher average gas price.

The operational costs chiefly concern production and transport costs.

At year-end 2012, one person had been seconded from GasTerra to EBN. The total wage costs have been included in the operational costs. In 2012, these amounted to EUR 8.2 million (2011: EUR 8.6 million), of which EUR 6.4

EBN Annual Report | 2012 | 71

(6) Financial income and expense

(7) Result for associates

In EUR million

2012

2011

interest income

4

7

interest income on financial instruments at fair value via the result

43

40

income on financial instruments at fair value via the result

25

90

other financial income

27

2

total financial income

99

139

-43

-40

interest expenses

2012

2011

GasTerra B.V.

14

14

NOGAT B.V.

26

32

NGT-Extensie

8

7

48

53

2012

2011

759

622

12

71

771

693

In EUR million

total

(8) Tax In EUR million current tax expenses

interest expenses on financial instruments at fair value via the result

-59

-50

expenses on financial instruments at fair value via the result

-54

-46

deferred tax expenses arising from temporary differences total

At 25.0%, the effective tax burden for 2012 was the same interest expense on discounted provisions

-45

-25

-

-71

total financial expenses

-201

-232

net financing costs

-102

-93

other financial income and expenses

Despite the higher amount of cash available in the year under review, interest income was lower than in 2011 as a result of lower market interest rates.

Interest expenses relate to expenses for short-term and long-tem loans.

In addition to the interest result, income and expenses on financial instruments relate among others to the valuation results for non-current loan-related derivatives.

72 | EBN Annual Report | 2012

as in 2011.

In 2012, the nominal rate for corporate tax in the Netherlands was 25.0% (2011: 25.0%).

The balance of deferred tax assets and tax liabilities rose

(9) Net profit

by EUR 15 million as a result of the following changes:

The net profit for 2012 from continuing operations was EUR 2,360 million, EUR 229 million (11%) higher than

2012

2011

102

19

deferred tax liabilities

-222

-67

total

-120

-48

- differences between commercial and fiscal valuation of property, plant and equipment

79

-155

- differences between commercial and fiscal valuation of provisions

-94

83

-135

-120

8

102

-143

-222

-94

83

79

-155

In EUR million

for 2011.

balance at 1 January deferred tax assets

movements as a result of:

balance at 31 December

of which: - deferred tax assets - deferred tax liabilities

movement in assets movement in liabilities

Deferred tax assets and liabilities include future tax assets and liabilities arising from temporary differences between the amounts calculated in accordance with the commercial principles and those calculated in accordance with fiscal standards.

EBN Annual Report | 2012 | 73

Notes to the consolidated balance sheet

(10) Property, plant and equipment In EUR million

production, transport and storage facilities

total

drilling

reimbursements

capitalisation of decommissioning and storage costs

capital expenditure & wells under construction

balance at 1 January 2011 cost

11,327

5,948

2,625

1,428

631

695

depreciation and amortization

7,763

4,401

1,817

1,177

368

-

carrying amount

3,564

1,547

808

251

263

695

- capital expenditure

463

239

49

-

-

169

- capital expenditure on exploration drilling

148

-

131

-

-

17

-

329

245

-

-

-574

1

-

-

-

-

1 -

changes in 2011 cost:

- commissioning - capitalisation of borrowing costs - capitalisation of decommissioning and storage costs

675

-

-

-

675

- decommissioning

-20

-20

-

-

-

-

- writing off dry wells

-28

-

-

-

-

-28

-617

-298

-242

-26

-51

-

20

20

-

-

-

-

642

270

183

-20

624

-415

depreciation and amortization: - depreciation and amortization - decommissioning balance at 31 December 2011 cost

12,566

6,496

3,050

1,434

1,306

280

depreciation and amortization

8,360

4,679

2,059

1,203

419

-

carrying amount

4,206

1,817

991

231

887

280

567

89

177

5

-

296

54

-

-

-

-

54

-

55

143

-

-

-198

3

-

-

-

-

3

changes in 2012 cost: - capital expenditure - capital expenditure on exploration drilling - commissioning - capitalisation of borrowing costs - capitalisation of decommissioning and storage costs - decommissioning - writing off dry wells

-126

-

-

-

-126

-

-

-

-

-

-

-

-48

-

-40

-

-

-8

-745

-290

-260

-24

-171

-

-

-

-

-

-

-

-295

-146

20

-19

-297

147

depreciation and amortization: - depreciation and amortization - decommissioning balance at 31 December 2012 cost

13,016

6,640

3,330

1,439

1,180

427

depreciation and amortization

9,105

4,969

2,319

1,227

590

-

carrying amount

3,911

1,671

1,011

212

590

427

74 | EBN Annual Report | 2012

At EUR 621 million, capital expenditure in 2012 was 2%

interest is added to the capitalised and amortised amount

higher than in 2011 (EUR 611 million). That expenditure

at 3.4%, bringing the amount of financing costs capitalised

was split between onshore at EUR 204 million (2011:

and amortised up to EUR 3 million (2011: EUR 1 million).

EUR 228 million) and offshore at EUR 417 million (2011:

(11) Associates

EUR 383 million).

EBN defines as associates its 40% participation in GasTerra In 2012, the decrease in the capitalisation and amortisation

B.V., its 45% participation in NOGAT B.V. and a number

of the estimated decommissioning and storage costs for

of smaller participations, including the 12% participation

installations amounted to EUR 126 million (2011: plus EUR

in the NGT Extensie. The latter participation is included

675 million). For further information please refer to note 15.

under ‘other’. Associates are shown on the basis of the equity method. The profits are distributed annually, and so

As a result of the application of IAS 23 “Borrowing Costs”,

there is no change in the amounts for which the participa-

for the Bergermeer project and Norg gas storage project,

tions are shown in the balance sheet.

GasTerra

NOGAT

other

2012 total

GasTerra

NOGAT

other

2011 total

balance at 1 January

86

13

14

113

86

13

14

113

share in profit

14

26

7

47

14

32

6

52

-14

-26

-8

-48

-14

-32

-6

-52

86

13

13

112

86

13

14

113

in EUR million

dividend received balance at 31 December

The following table shows summarised financial information on the GasTerra B.V., NOGAT B.V. and NGT Extensie associates on a 100%-basis.

GasTerra

NOGAT

NGTExtensie

2012 total

GasTerra

NOGAT

NGTExtensie

2011 total

3,697

67

-

3,764

4,017

84

-

4,101

37

52

13

102

33

44

14

91

3,518

11

1

3,530

3,834

7

1

3,842

-

-

-

-

-

-

-

-

net sales

23,381

88

95

23,564

21,095

106

78

21,279

net profit

36

58

95

189

36

71

74

181

in EUR million Balance sheet total assets

current non-current

liabilities

current non-current

EBN Annual Report | 2012 | 75

(12) Inventories In EUR million materials gas condensate and oil total

(14) Shareholder’s equity 2012

2011

6

5

27

61

7

2

40

68

In EUR million balance at 1 January

total profit final dividend previous year interim dividend balance at 31 December

2012

2011

204

174

2,360

2,131

-76

-46

-2,288

-2,055

200

204

(13) Receivables These can be specified as follows:

Each month EBN pays the (provisional) profit to the shareholder, the Ministry of Economic Affairs. These periodic

In EUR million

2012

2011

accounts receivable from associates

1,005

873

22

39

1,027

912

52

173

1,079

1,085

other trade accounts receivable total trade accounts receivable

other receivables and deferred items total

payments largely determine EBN’s balance sheet structure and result in the comparatively low amount of the company’s shareholders’ equity. On the other hand, the company has very substantial cash flow throughout the year.

The authorised, issued and paid up share capital amounted to EUR 128 million in 2012 (2011: EUR 128 million) and comprised 284,750 shares (2011: 284,750 shares), each

Receivables fell by EUR 6 million (1%), chiefly as a result

with a nominal value of EUR 450. The declared dividend

of lower sales volumes in the fourth quarter of 2012 in

per share amounted to EUR 8,302 (2011:

relation to the fourth quarter of 2011.

EUR 7,378).

Associates relates to GasTerra B.V., in which EBN has a

The proposed final dividend of EUR 72 million (2011:

40% participation. For information on credit risks please

EUR 76 million) will be paid out once the General Meeting

refer to note 19.

of Shareholders has adopted the financial statements. This amount is the balance of the net profit balance at EUR 2,360 million and the interim dividend already paid out at EUR 2,288 million. The proposed final dividend has not been deducted from the shareholders’ equity.

76 | EBN Annual Report | 2012

(15) Provisions

the basis of the current price level, without allowing for

Provisions for decommissioning and restoration costs

inflation, and stated at the present value with an effective

cover commitments with terms of 1 to 50 years.

interest rate of 1.2% (2011: 0.3%). The equivalent of the provision stated at the present value is included in

Provisions for ground subsidence also cover commitments

tangible fixed assets and depreciated on the basis of the

with terms of 1 to 50 years.

UoP method. The unwinding of discount of the provision is calculated based on the nominal interest percentage

The provision for decommissioning and storage costs is

of 2.3% (2011: 2.0%).

based on information from the operators and our own

The total for provisions was reduced by EUR 76 million,

analysis and is determined by estimating the costs on

which is the balance of the changes shown below:

in EUR million balance at 1 January 2010

additions withdrawals revision unwinding of discount

balance at 31 December 2011

additions withdrawals revision unwinding of discount

balance at 31 December 2012

Decommissioning and restoration costs

subsidence

total

1,276

62

1,338

-

5

5

-9

-1

-10

675

-

675

25

-

25

1,967

66

2,033

-

19

19

-13

-1

-14

-126

-

-126

45

-

45

1,873

84

1,957

The reduction in the provision for decommissioning and

Additionally, the estimated costs for dismantling and

storage costs at EUR 94 million was primarily caused by

removing installations have been updated by the increase

amending the discount rate to an effective interest rate

in the estimated costs and new insight into the dates for

of 1.2% (2011: 0.3%).

terminating production.

EBN Annual Report | 2012 | 77

(16) Current and non-current borrowings 2012

in EUR million

debenture loans private loans

total

of which current

total

of which current

1,893

373

1,871

288

132

-

150

-

-

-

425

425

2,025

373

2,446

713

commercial paper total

2011

In 2012, one debenture loan of CHF 350 million fell due.

nominal value of CHF 450 million will be repaid. This was

Total borrowings decreased by EUR 421 million (-17%).

shown in 2012 as a short-term loan.

This decrease is chiefly the result of the strong increase of

No security has been provided for the outstanding borro-

net cash from operating activities in 2012 and as a result

wings with a total remaining debt at 2012 year-end of EUR

thereof not taking out commercial paper and reducing the

2,025 million. Clauses are included in the agreements for

debenture loan position. In 2013, a debenture loan with a

these loans that limit the security that can be demanded.

Non-current borrowings Non-current borrowings in the balance sheet comprise the following: in EUR million

2012

2011

JPY

5.000 mn

1,59%

private loan

2004/2014

44

50

CHF

350 mn

1,75%

public loan

2005/2012

-

288

CHF

450 mn

2,75%

public loan

2006/2013

372

370

CHF

400 mn

3,00%

public loan

2007/2014

331

329

CHF

125 mn

3,00%

public loan

2007/2014

104

103

JPY

10.000 mn

1,775%

private loan

2007/2017

88

100

CHF

325 mn

2,125%

public loan

2010/2020

269

267

CHF

125 mn

2,125%

public loan

2010/2020

104

103

CHF

350 mn

0,75%

public loan

2011/2016

290

288

CHF

150 mn

1,625%

public loan

2011/2023

124

123

CHF

235 mn

0,625%

public loan

2012/2019

195

-

CHF

125 mn

1,125%

public loan

2012/2024

104

-

2,025

2,021

total

78 | EBN Annual Report | 2012

Borrowings in foreign currencies and associated interest

(17) Other non-current liabilities

charges have been fully converted into euros by means

This item mainly relates to a debt of EUR 17 million (2011:

of cross-currency interest rate swaps. This neutralises

EUR 17 million) to the State resulting from the GasTerra

any currency-fluctuation effects, as shown in the table.

B.V. stock dividend. The Dutch State is entitled to part

The average interest rate on all long-terms borrowings,

of EBNâ&#x20AC;&#x2122;s entitlement to the GasTerra B.V. dividend in the

including the effects of the cross-currency interest rate

event of GasTerra B.V. being liquidated.

swaps, was 3.3% (2011: 3.4%). All long-term borrowings have fixed interest rates. All cross-currency swap borro-

(18) Other current liabilities

wings also have fixed interest rates, with the exception of

This item can be specified as follows:

the cross-currency interest-rate swap associated with the in EUR million

JPY 2004/2014 loan and the JPY 2007/2017 loan.

trade accounts payable

The following table lists the outstanding debenture loans

interest payments

and private loans in order of their term to maturity.

levies

2012

2011

within 1 year

372

288

within 1 to 2 years

479

370

within 2 to 3 years

-

482

within 3 to 4 years

290

-

within 4 to 5 years

88

288

796

593

2,025

2,021

in EUR million

after 5 years

total

other liabilities

total

2012

2011

487

251

33

32

679

525

90

148

1,289

956

The increase in levies is mainly due to a higher outstanding MOR obligation.

More than 50% of the outstanding non-current borrowings have remaining terms to maturity of more than three years.

Of the borrowings with remaining terms to maturity of more than 5 years, a total of EUR 195 million will mature in 2019, EUR 373 million in 2020, EUR 124 million in 2023 and EUR 104 million in 2024.

EBN Annual Report | 2012 | 79

Policy to control financial risks Net liabilities In EUR million

(19) Risk management

2012

2011

1,652

1,733

373

713

2,025

2,446

borrowings non-current borrowings

General

current borowings

The main financial risks for EBN are the liquidity risk, the credit risk and the market risk (consisting of interest rate risk

total borrowings

and currency risk). EBNâ&#x20AC;&#x2122;s financial policy focuses on limiting

cash and cash equivalents

-366

-9

the effects of currency and interest-rate fluctuations on its

financial derivatives

-224

-310

profit. EBN uses financial derivatives to manage interest and

net liabilities (A)

1,435

2,127

shareholderâ&#x20AC;&#x2122;s equity (B)

200

204

gearing ratio A/(A+B)*100%

88%

91%

currency risks, specifically those relating to the funding of its operations. The company does not take any speculative positions with financial derivatives.

Capital management

Liquidity risk

EBN aims for continuous good access to the money and

EBN has a commercial paper programme of EUR 2,000

capital markets by means of, for example, prudent financing

million. This is the same as in 2011. At year-end 2012 no

policy aimed at maintaining the short and long-term credit

commercial paper was issued.

ratings at the highest possible levels. Capital expenditure decisions are evaluated on the basis of the expected return, considering EBNâ&#x20AC;&#x2122;s weighted average cost of capital.

The following table shows the expected annual cash flows, along with the interest payable on the borrowings and the costs of redeeming the associated derivatives: 2011

in EUR million

cash flow from derivatives

2011

2010

total cash out

total cash out

borrowings

interest

payment at redemption

within 1 year

713

-58

-713

35

-736

-545

within 1 to 2 years

370

-48

-370

58

-360

-272

within 2 to 3 years

482

-36

-482

131

-387

-325

within 3 to 4 years

-

-22

-

-

-22

-376

within 4 to 5 years

288

-22

-288

-4

-313

-11

after 5 years

593

-72

-593

92

-574

-430

2,446

-258

-2,446

312

-2,392

-1,959

total

80 | EBN Annual Report | 2012

2011

in EUR million

2011

2010

borrowings

interest

payment at redemption

cash flow from derivatives

total cash out

total cash out

within 1 year

372

-54

-372

61

-365

-736

within 1 to 2 years

479

-42

-479

113

-408

-360

within 2 to 3 years

-

-28

-

-

-28

-387

within 3 to 4 years

290

-28

-290

-1

-319

-22

within 4 to 5 years

88

-21

-88

27

-82

-313

796

-83

-796

55

-824

-574

2,025

-256

-2,025

255

-2,026

-2,392

after 5 years total

Credit risk

Interest rate risk

The credit risk to which EBN is exposed consists mainly

The objective of EBN’s interest rate risk policy is to limit

of the amount it has on deposit at credit institutions,

interest rate risks arising from the company’s funding and

investments in money market funds and the market value

thus to achieve minimal interest charges. A maximum of

of outstanding financial derivatives. EBN limits the credit

60% of the long-term borrowings and financial derivatives

risk by only doing business with financial institutions with

shall have a variable interest rate in accordance with inter-

high creditworthiness and by setting specific credit limits

nal guidelines. At year-end 2012, 94% of the debt position

for each financial institution, based on the institution in

was at a fixed interest rate.

question’s credit rating. For lending money, the minimum is a P-1 Moody’s or A-1 Standard & Poor’s short-term

The following analysis of the sensitivity of borrowings and

rating and an A2 Moody’s or A Standard & Poor’s long-

the related financial derivatives to interest rate movements

term rating. A minimum credit rating of Moody’s Aaa and

is based on a direct change of 1 percentage point in the

Standard & Poor’s AAA applies for money market funds.

interest rates for all currencies and maturities as at 31

If derivative transactions are carried out in the context of

December 2012. All other variables remain unchanged.

long-tem financing this is only done with a counterparty

A reduction of 1% in interest rates would result in an

with a minimum of A2 Moody’s or A Standard & Poor’s

estimated decrease of EUR 13 million in net financing

long-term rating. EBN did not suffer any credit losses in

costs, based on the portfolio of financial instruments at

2012.

31 December 2012. An increase of 1% in interest rates would result in an estimated increase of EUR 12 million in

Credit risk on receivables

net financing costs. The main reason for these effects is

In 2012 EBN made 91% (2011: 91%) of its sales to Gas-

that a change in the fair value of derivatives as a result of

Terra B.V. (long term rating S&P AA+), for which the credit

a change in interest rate is charged directly to profit.

risk is estimated as low. Amounts owed by GasTerra B.V. account for 93% (2011: 97%) of total receivables.

EBN Annual Report | 2012 | 81

The following table shows the sensitivity of the fair value of the financial instruments to changes in interest rate as at 31 December 2012.

2012

carrying amount

fair value

change in fair value +1%

change in fair value -1%

in EUR million cash and cash equivalents

366

366

-2

2

1,079

1,079

-

-

-373

-378

2

-2

other current liabilities

-1,289

-1,289

-

-

non-current borrowings

-1,652

-1,744

88

-95

cross currency swaps positive used for non-current borrowings

257

257

-12

13

cross currency swaps negative used for non-current borrowings

-33

-33

-

-

-

-

-

-

-1,645

-1,742

76

-82

receivables current borrowings

forward exchange contracts used for current borrowings

totaal

2011

carrying amount

fair value

change in fair value +1%

change in fair value -1%

in EUR million cash and cash equivalents

9

9

-

-

1,085

1,085

-

-

current borrowings

-713

-716

2

-2

other current liabilities

-956

-956

-

-

-1,733

-1,820

83

-89

cross currency swaps positive used for non-current borrowings

314

314

-17

19

cross currency swaps negative used for non-current borrowings

-17

-17

-

1

forward exchange contracts used for current borrowings

13

13

-

-

-1,998

-2,088

68

-71

receivables

non-current borrowings

total

At year-end 2011, sensitivity of financial liabilities to interest rate changes with regard to the fair value of the financial instruments ranged between a negative amount of EUR 17 million (+1% change in interest rates) and a positive amount of EUR 19 million (-1% change in interest rates).

82 | EBN Annual Report | 2012

Currency risk EBN fully hedges currency risks arising from sales, purchases and borrowings at the time that the trade receivables or trade liabilities arise. At year-end 2012, a currency risk of USD 7 million in respect of trade receivables was hedged (year-end 2011 none).

Currency risks on short-term borrowings in foreign currencies are hedged with forward exchange contracts. At year-end 2012 no forward currency contracts had been concluded relating to short-term loans issued in foreign currencies (at yearend 2011 USD 550 million). Currency risks on long-term borrowings in foreign currency are hedged with cross currency interest rate swaps (see note 16).

The following analysis of the sensitivity of the net debt (including financial derivatives) to fluctuations in exchange rates against the euro is based on a 10% movement in all exchange rates in relation to the euro compared to their levels at 31 December 2012, with all other variables remaining unchanged. A change of +10% means the euro weakens against the foreign currencies, while a change of -10% means the euro strengthens against the foreign currencies.

2012

carrying amount

fair value

change in fair value +10%

change in fair value -10%

in EUR million cash and cash equivalents

366

366

-

-

1,079

1,079

-

-

-373

-378

-43

35

other current liabilities

-1,289

-1,289

-

-

non-current borrowings

-1,652

-1,744

-195

159

cross currency swaps used for non-current borrowings

257

257

150

-123

forward exchange contracts used for current borrowings

-33

-33

87

-72

-

-

-

-

-1,645

-1,742

-1

-1

receivables current borrowings

forward exchange contracts used for economic hedging

total

EBN Annual Report | 2012 | 83

2011

carrying amount

fair value

change in fair value +10%

change in fair value -10%

in EUR million cash and cash equivalents

9

9

-

-

1,085

1,085

-

-

current borrowings

-713

-713

-80

65

other current liabilities

-956

-956

-

-

-1,733

-1,820

-205

168

cross currency swaps used for non-current borrowings

314

314

190

-155

forward exchange contracts used for current borrowings

-17

-17

47

-39

forward exchange contracts used for economic hedging

13

13

48

-39

-1,998

-2,085

-

-

receivables

non-current borrowings

total

Fair value of financial instruments The table below summarises the carrying amounts and estimated fair values of financial instruments:

in EUR million

31 december 2012 carrying amount

31 december 2011

fair value

carrying amount

fair value

assets associates

112

112

113

113

current receivables

1,079

1,079

1,165

1,165

financial derivatives

257

257

327

327

cash and cash equivalents

366

366

9

9

1,652

1,744

1,733

1,820

current borrowings

373

378

713

716

financial derivatives

33

33

17

17

1,399

1,399

1,052

1,052

liabilities non-current borrowings

other current liabilities

Fair values of listed non-current borrowings are based on published rate (level 1 according to IFRS), while the other fair values are calculated on the basis of the market information available (level 2 according to IFRS). All financial assets and liabilities at fair values with changes in value recognised in comprehensive income of profit are classified at level 2.

84 | EBN Annual Report | 2012

Current receivables, cash and cash equivalents and short-term debts are shown at their carrying amounts. In view of the short term to maturity of these instruments, these amounts approximate their fair values. The following table summarises the carrying amounts of financial derivatives, specified according to type and objective: assets

liabilities

total

314

-17

314

13

-

13

total financial derivatives in relation to borrowings

327

-

327

balance as at 31 December 2011

327

-

327

cross currency interest rate swaps

257

-33

224

-

-

-

total financial derivatives in relation to borrowings

257

-33

224

balance as at 31 December 2012

257

-33

224

in EUR million cross currency interest rate swaps forward currency contracts

forward currency contracts

EBN Annual Report | 2012 | 85

86 | EBN Annual Report | 2012

Other notes

(20) Rights and obligations not shown in the balance sheet

(22) Related parties

As indicated in the accounting principles with respect to

total of 78 (2011: 79) contracts with GasTerra B.V. Of the

the valuation of assets and liabilities and the determination

net sales of EUR 8,528 million, EUR 7,798 million was

of the profit, EBN participates in numerous joint ventures.

generated through GasTerra B.V. (2011: EUR 7,103 million

The basis for this is laid down in agreements of coopera-

and EUR 6,488 million respectively). In 2012, receivables

tion, from which multi-year financial rights and obligations

included an amount of EUR 1,005 million (2011: EUR 873

arise for the future. As an indication, at the balance sheet

million) for supplies to GasTerra B.V.*

date, the remaining obligations at year-end 2012 for three

The Dutch State, being the shareholder, can be regarded

large investment projects (Bergermeer gas storage, Q13

as an associated party. All levies, corporation taxes and net

Amstel, Norg UGS) amounted to EUR 453 million (2011:

profits are paid to the State. More information can be found

EUR 429 million).

in notes 14 and 18 in these Financial Statements.

Furthermore, as at 31 December 2012, EBNâ&#x20AC;&#x2122;s (in)direct

(23) Key management

share in proven and probable gas reserves in fields in

In 2012, the total remuneration, pension and other labour

which EBN participates amounted to 395 billion (2011: 431 billion

m3

m3

GasTerra B.V. and EBN are related parties. EBN has a

GE

GE).

costs paid to key management (5 team of Directors and 4 Supervisory Board) amounted to EUR 1.5 million (2011: EUR 1.0Â million; 3 Executive Board members and

In 2013, NAM will conduct an inventory study in the

4 Supervisory Board). The total labour costs paid to key

Groningen Province regarding the vulnerability of buildings

management in 2012 can be specified as follows:

as a result of earthquakes induced by gas production in 2012

in EUR million

the Groningen field. Where necessary, this study will lead to preventive measures being taken. It is not possible, at the moment, to give a reliable estimation of the volume of expenditure entailed in these measures.

short-term employee benefits

1.2

post-employment benefits

0.3

total

1.5

(21) Notes on the statement of cash flows

(24) Events after the balance sheet date

The statement of cash flows was prepared on the basis of

ring further disclosure.

There were no events after the balance sheet date requi-

the indirect method with a comparison made between the opening and closing balances. Movements not resulting in

Utrecht, 20 March 2013

an inflow or outflow of cash were subsequently eliminated.

Executive Board

Supervisory Board

Information on movements in the statement of cash flows

J.D. Bokhoven

R.M.J. van der Meer

can largely be derived from the statements of movements

A.H.P. Gratama van Andel

in the relevant balance sheet items.

G-J. Kramer

H.M.C.M. van Oorschot

* This includes the proportional share of sales in the concessions in which EBN does not, itself, receive the gas but is entitled to a proportional share in the proceeds. GasTerra pays the proceeds directly to EBN.

EBN Annual Report | 2012 | 87

Company profit and loss account

in EUR million

2012

2011

56

60

other income after tax

2,304

2,071

net profit

2,360

2,131

-

-

2,360

2,131

income from participations

other comprehensive income total comprehensive income

88 | EBN Annual Report | 2012

Company balance sheet

in EUR million note

year-end 2012

year-end 2011

property, plant and equipment

10

3,877

4,196

associates

11

112

113

3,989

4,309

assets non-current assets

liabilities shareholderâ&#x20AC;&#x2122;s equity

note

year-end 2012

year-end 2011

128

128

14

share capital retained earnings

72

76

200

204

15

1,932

2,033

8

135

120

borrowings

16

1,652

1,733

other

17

non-current liabilities provisions deferred tax liabilities

16

16

3,735

3,902

373

713

current assets inventories

12

40

68

receivables

13

1,079

1,085

-

80

257

327

deferred tax credits derivatives cash and cash equivalents

total

19

347

19

1,723

1,579

5,712

5,888

current liabilities borrowings

16

tax other

18

derivatives

19

total

110

96

1,261

956

33

17

1,777

1,782

5,712

5,888

EBN Annual Report | 2012 | 89

Notes to the company financial statements General

consolidated financial statements. In view of the minimal

EBNâ&#x20AC;&#x2122;s company financial statements are prepared in

differences between the other balance sheet items shown

accordance with the principles for financial reporting gene-

in the consolidated and company financial statements, for

rally accepted in the Netherlands and the legal stipulations

further information on these items, please refer to the no-

regarding the financial statements as defined in Part 9,

tes of explanation to the consolidated financial statements,

Book 2 of the Dutch Civil Code.

which can be found on pages 68 to 85.

To the determination of the accounting principles applied

Commitments

for valuing assets and liabilities and the determination of

General guarantees as referred to in section 403, Book 2,

the results of the company financial statements, use has

of the Dutch civil code, have been given by EBN on behalf

been made of the option presented in article 2:362, para-

of EBN Capital B.V.

graph 8 of the Dutch Civil Code. The principles for the valuation of assets and liabilities and determining the result of

Fiscal unity

the company financial statements are therefore the same

For corporate Income Tax and Value Added Tax, EBN

as those used in the consolidated financial statements.

forms a fiscal unity with EBN Capital B.V. EBN and her

Participations where any significant influence is exerted on

subsidiary form a fiscal unity and are jointly and separately

the commercial and financial policy are valued on the basis

liable for the liabilities of the fiscal unity.

of the net asset value.

Fees paid to external auditors The consolidated financial statements have been prepared

Fees paid to Ernst & Young, which are included in the

in accordance with the International Financial Reporting

operational costs, amounted in 2012 to:

Standards (IFRS) as accepted within the European Union

EUR 782,000 for audit services (company and joint

(EU-IFRS) and with section 9, Book 2 of the Dutch Civil

venture audits) (2011: EUR 629,000), EUR 0 for tax

Code. For a description of the principles applied, please

advice (2011: EUR 0) and EUR 32,000 for other services

refer to pages 56 to 63.

(2011: EUR 187,000).

Company profit and loss account

Directorâ&#x20AC;&#x2122;s remuneration

The company profit and loss account has been formulated

As of 2012, EBNâ&#x20AC;&#x2122;s statutary Executive Board comprises

in accordance with the limitations permitted pursuant to

one person. Consequentially, for the disclosure of the re-

article 2:402 of the Dutch Civil Code.

muneration of Directors in 2012, exemption in accordance with article 2:383 paragraph 1 of the Dutch Civil Code has

Other notes

been applied. In 2012 remuneration paid to the Supervi-

The single balance sheet includes the valuation of the

sory Board members amounted to EUR 0.1 million (2011:

100% participations, which are consolidated in the

EUR 0.1 million).

90 | EBN Annual Report | 2012

Other information

Profit appropriation

Utrecht, 20 March 2013

Profit appropriation takes place in accordance with what is Executive Board

Supervisory Board

J.D. Bokhoven

R.M.J. van der Meer

A.H.P. Gratama van Andel

G-J. Kramer H.M.C.M. van Oorschot

defined in article 21 of the company’s articles of association.

To the shareholder: — part of the profit will be distributed annually as a special profit distribution; — the remainder of the profit will be distributed as a dividend.

Events after the balance sheet date For more information, please refer to note 24 of these Financial Statements.

EBN Annual Report | 2012 | 91

Independent auditor’s report

To: the Shareholder of EBN B.V.

audit in accordance with Dutch law, including the Dutch Standards on Auditing. This requires that we comply with

Report on the financial statements

ethical requirements and plan and perform the audit to

We have audited the accompanying financial statements

obtain reasonable assurance about whether the financial

2012 of EBN B.V., Utrecht. The financial statements

statements are free from material misstatement.

include the consolidated financial statements and the

An audit involves performing procedures to obtain audit

company financial statements. The consolidated financial

evidence about the amounts and disclosures in the

statements comprise the consolidated balance sheet as

financial statements. The procedures selected depend on

at 31 December 2012, the consolidated statements of

the auditor’s judgment, including the assessment of the

comprehensive income, summary of changes in sharehol-

risks of material misstatement of the financial statements,

der’s equity and statement of cash flows for the year then

whether due to fraud or error.

ended, and notes, comprising a summary of the significant accounting policies and other explanatory information.

In making those risk assessments, the auditor considers

The company financial statements comprise the company

internal control relevant to the entity’s preparation and fair

balance sheet as at 31 December 2012, the company

presentation of the financial statements in order to design

income statement for the year then ended and the notes,

audit procedures that are appropriate in the circumstan-

comprising a summary of the accounting policies and

ces, but not for the purpose of expressing an opinion on

other explanatory information.

the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting

Executive Board’s responsibility

policies used and the reasonableness of accounting esti-

The Executive Board is responsible for the preparation and

mates made by the Executive Board, as well as evaluating

fair presentation of these financial statements in accor-

the overall presentation of the financial statements.

dance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book

We believe that the audit evidence we have obtained is

2 of the Dutch Civil Code, and for the preparation of the

sufficient and appropriate to provide a basis for our audit

report by the Executive Board in accordance with Part

opinion.

9 of Book 2 of the Dutch Civil Code. Furthermore, the Executive Board is responsible for such internal control as

Opinion with respect to the consolidated

it determines is necessary to enable the preparation of the

financial statements

financial statements that are free from material misstate-

In our opinion, the consolidated financial statements give

ment, whether due to fraud or error.

a true and fair view of the financial position of EBN B.V. as at 31 December 2012 its result and its cash flows for the

Auditor’s responsibility

year then ended in accordance with International Financial

Our responsibility is to express an opinion on these finan-

Reporting Standards as adopted by the European Union

cial statements based on our audit. We conducted our

and with Part 9 of Book 2 of the Dutch Civil Code.

92 | EBN Annual Report | 2012

Opinion with respect to the company financial statements In our opinion, the company financial statements give a true and fair view of the financial position of EBN B.V. as at 31 December 2012 and of its result for the year then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code.

Report on other legal and regulatory requirements Pursuant to the legal requirement under Section 2:393 sub 5 at e and f of the Dutch Civil Code, we have no deficiencies to report as a result of our examination whether the report by the Executive Board, to the extent we can assess, has been prepared in accordance with Part 9 of Book 2 of this Code, and whether the information as required under Section 2:392 sub 1 at b-h has been annexed. Further we report that the report by the Executive Board, to the extent we can assess, is consistent with the financial statements as required by Section 2:391 sub 4 of the Dutch Civil Code.

Amsterdam, 20 March 2013 Ernst & Young Accountants LLP Signed by J.J. Vernooij

EBN Annual Report | 2012 | 93

2012

94 | EBN Annual Report | 2012

KEY FIGURES

in EUR million

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

2012

2011

2010

2009

2008

2007

2006

2005

2005

2004

2003 14

number of EBN participations in joint ventures: - production licences onshore

27

24

23

22

21

20

14

14

14

14

- production licences offshore

101

101

103

103

100

95

85

85

85

77

77

48

47

48

45

41

26

17

19

19

22

26

- exploration licences sales (billion m³, 100%)

73

72

80

70

73

64

66

67

67

72

63

change in % compared to previous year (100%)

+1

-10

+14

-5

+11

-3

-1

-7

-7

+15

-4

- sales Groningen (billion m³, EBN share)

19

18

20

15

16

12

13

13

13

13

11

- sales small fields (billion m³, EBN share)

11

12

13

14

15

15

15

15

15

18

15

30

30

33

29

30

27

28

28

28

30

26

26,76

22,63

18,58

20,72

26,91

20,67

21,52

16,46

16,46

13,17

13,88

8,528

7,103

6,486

6,387

8,698

6,090

6,264

4,883

4,883

4,230

3,872

3,384

3,384

total sales (billion m³, EBN share) average selling price of gas (€-cents per m³, 35.17 MJ/m³) sales from: - continuing operations - discontinued operations total sales

8,528

7,103

6,486

6,387

8,698

6,090

6,264

8,267

8,267

4,230

3,872

20

10

2

-27

+43

-3

+28

+15

+15

+9

+7

2,360

2,131

2,076

2,211

3,269

2,367

2,378

1,673

1,637

1,534

1,380

2,154

2,154

change from continuing operations in % compared to previous year net profit from: - continuing operations - discontinued operations total net profit

2,360

2,131

2,076

2,211

3,269

2,367

2,378

3,827

3,791

1,534

1,380

28

30

32

35

38

39

38

34

34

36

36

- capital expenditure onshore

202

228

224

238

129

277

146

121

121

143

138

- capital expenditure offshore

419

383

383

475

447

405

478

446

446

207

316

net profit from continuing operations in % of sales property, plant and equipment:

- decommissioning and restoration

-126

675

57

-163

93

137

273

149

total capital expenditure

495

1,286

664

550

669

819

896

716

567

350

454

depreciation and amortization

745

617

499

462

501

494

403

374

376

337

344

shareholders’ equity

200

204

174

158

160

162

290

237

437

348

329

88

91

91

93

91

93

86

5,565

5,684

5,146

4,520

5,386

4,664

3,902

3,437

2,977

2,730

2,592

gearing ratio (%) outside capital

EBN Annual Report | 2012 | 95

Glossary

Bcm

Billion cubic metres.

BOE

Barrel of oil equivalent

CCS

Carbon capture and storage.

Cluster

Location from which multiple wells can be drilled.

Corporate Governance Code (old)

Code of Conduct for Companies listed on the stock exchange.

Corporate Governance Code (new) The Dutch Corporate Governance Code of the Corporate Governance Code Monitoring Committee.

COSO

The Committee of Sponsoring Organizations of the Treadway Commission.

CSR

Corporate Social Responsibility

Cushion gas

Gas that has to be present in a field or storage facility to maintain the pressure.

Dashboard

Review of company-specific performance indicators.

Energy mix

Proportion of energy used in the Netherlands from different sources of energy.

End-of-field-life

Gas or oil field in the final phase of production.

E&P

Exploration and production.

EZ

Ministry of Economic Affairs.

Fallow Acreage Convenant Covenant, signed on 31 August 2010, for stimulating the exploration for and production of oil and gas reserves and the storage of minerals in the Dutch part of the continental shelf, as agreed between the Minister of Economic Affairs, Agriculture and Innovation and mining companies with operations on the continental shelf.

Fracking Technique by which fluid is injected under high pressure into stone containing gas, â&#x20AC;&#x2DC;breakingâ&#x20AC;&#x2122; the stone so the gas can be extracted.

Fuel mix

Percentage of each fuel source in the total fuels used to generate energy.

Gasgebouw

Public-private cooperation in the Groningen Partnership and GasTerra.

Gas Hub

European gas-market centre.

Gas Hub Discussion Platform Discussion forum of the Dutch government, the gas industry and knowledge infrastructure organisations to discuss new initiatives and strategic issues concerning the physical national and international gas-hub infrastructure Gas deposit

Subsurface accumulation of producible gas.

GE Groningen equivalent (m3 gas with a combustion value of 35.17 MJ at 0 degrees Celsius and 101.325 kPa).

Geothermal energy

Thermal energy generated and stored in the Earth.

HR

Human Resources.

ICT

Information and Communication Technologies.

IFRIC

International Financial Reporting Interpretations Committee.

IFRS

International Financial Reporting Standards.

96 | EBN Annual Report | 2012

IMS

Integral Management System.

JIP

Joint Industry Project

LNG

Liquefied natural gas.

Mining Act Dutch Act containing regulations governing the exploration for and production and storage of minerals.

NAM Nederlandse Aardolie Maatschappij (Dutch oil company in which Royal Dutch Shell and Exxon Mobil have equal shares).

Near-field exploration

Exploration for gas close to existing production locations.

NOGEPA

Netherlands Oil and Gas Exploration and Production Association.

NOV management

Non-operated venture management

Offshore

At sea.

Operating partner

See operator.

Operator Party in the production process that carries out production activities on behalf of the partners.

Permeability

The degree to which a solid substance can be pervaded by other substances.

PRMS Petroleum Resources Management System: international classification system describing the status and volumes of oil and gas resources.

ROAD

Rotterdam Storage and Capture Demonstration Project.

Scorecard

Review of department-specific performance indicators.

Shale gas Gas held in tight reservoirs in shales that have insufficient permeability for the gas to flow easily to the well bore.

Shallow gas Gas produced from relatively shallow reservoirs (< 800 m depth, mostly unconsolidated).

SodM

State Supervision of Mines.

Spot market Public financial market, in which surpluses are traded and shortages made up for immediate delivery and payment in the very short term.

State participation

Shareholder status of the Dutch State.

Stranded reserves or fields Natural gas deposits that are technically or economically impractical to develop and produce at a particular time.

Tight gas Gas produced from tight reservoirs in sandstones that have insufficient permeability for the gas to flow easily to the well bore.

TNO

Netherlands Organisation for Applied Science TNO.

Treasury

Management of a companyâ&#x20AC;&#x2122;s cash and cash equivalents.

EBN Annual Report | 2012 | 97

Contact information

Did our annual report give you interesting thoughts, raise questions or give inspiration?

You can always contact us to ask questions or to exchange views.

Visiting address EBN B.V. Moreelsepark 48 3511 EP Utrecht

Postal address PO Box 19063 NL-3501 DB Utrecht Telephone: +31 (0)30 2339001 Fax:

+31 (0)30 2339051

E-mail: ebn.mail@ebn.nl

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Design and layout a-design, Sassenheim

Photography Bas Duijs, Leiden Joel Frijhoff, Amsterdam

Printing Deltabach Grafimedia

Š 2013 EBN No part of this publication may be copied and/or made public by means of printing, photography, microfilm or in any other way whatsoever without EBNâ&#x20AC;&#x2122;s prior written consent.

98 | EBN Annual Report | 2012

EBN B.V. Postbus 19063, 3501 DB Utrecht

T +31(0)30 - 233 9001

ebn.mail@ebn.nl

www.ebn.nl